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NSE Intra-day chart (17 April 2018)
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Market Commentary 18 April 2018
Markets likely to make optimistic start on strong global cues


Indian equity benchmarks extended gaining streak for ninth straight session on Tuesday with frontline gauges ending just shy of 34,400 (Sensex) and 10,550 (Nifty) levels. Markets started the session on positive note with the World Bank forecasting a growth rate of 7.3% for India this year and 7.5% for 2019 and 2020, and noted that the country's economy has recovered from the effects of demonetisation and the Goods and Services Tax (GST). The World Bank also said that India should strive to accelerate investments and exports to take advantage of the recovery in global growth. Some support also came with the India Meteorological Department (IMD) forecasting that the country will receive normal monsoon for a third consecutive year. However, gains remained capped as investors kept a wary eye on geopolitical tensions and oil price movements. However, markets took U-turn and entered into red terrain as traders remained anxious with former President Pranab Mukherjee's statement that the country's demographic dividend runs the risk of turning into a demographic disaster if employment is not generated. He added that the country has achieved an economic growth of 6-8% in the last couple of decades but the inequality among different classes of the society is still huge and unacceptable. Sentiments also remained dampened on media report that the shortage of currency reported in Andhra Pradesh, Telangana and Madhya Pradesh in the past few weeks has spread to a few more states. There were complaints of cash shortages in eastern Maharashtra, Bihar and Gujarat on Monday. The shortage is being felt despite currency in circulation crossing the pre-demonetization level. However, buying in final hour of trade helped markets to regain green terrain after Finance Minister Arun Jaitley said that there is more than adequate currency in circulation and with the banks. Finally, the BSE Sensex surged 89.63 points or 0.26% to 34,395.06, while the CNX Nifty was up by 20.35 points or 0.19% to 10,548.70.


The US markets closed higher on Tuesday, with major indices ending at the highest levels in about a month as the latest round of corporate earnings supported the thesis that valuations are supported by economic activity. An upbeat attitude toward first-quarter earnings remained a driving factor for stocks. Meanwhile, a lack of escalation in the trade tensions between China and the US has also emboldened investors. Separately, the International Monetary Fund again lifted its estimate for US economic growth for this year and next, even as the international agency warned that tax cuts will just bring a momentary jolt to the world's biggest economy. In its world economic outlook, the IMF lifted its US growth estimate for 2018 to 2.9% and its 2019 estimate to 2.7%, both increases of two-tenths of a percentage point. It kept unchanged its world economic output estimate from January at 3.9% for both this year and next year. The IMF pointed out the Tax Cuts and Jobs Act, the $1.5 trillion tax cut law, gives a temporary allowance for companies to fully expense investment. This is a strong incentive, the IMF finds, for companies to push along investment projects. On the economy front, industrial production in March rose 0.5%. Production is estimated to have risen at an annual 4.5% rate in the first quarter, down from a blistering 7.8% pace in the final three months of the year. Capacity utilization rose to 78% in March from 77.7%, the highest rate in three years. Over the past 12 months, production has climbed 4.3%. Separately, housing starts ran at a seasonally adjusted annual pace of 1.32 million in March, up 2% compared to February. Permits were at a seasonally adjusted annual 1.35 million rate. The Dow Jones Industrial Average added 212.9 points or 0.87 percent to 24,573.04, the Nasdaq gained 49.635 points or 0.70 percent to 7,156.28, while the S&P 500 was up by 21.54 points or 0.81 percent to 2,677.84.


Crude oil futures ended higher on Tuesday, boosted by investors' growing concern over the potential for disruptions to crude supply, especially in the Middle East. Besides, as per a report, Oil minister from Oman have called on OPEC and Russia to extend their supply quota plan beyond 2018. Meanwhile, Kuwait's oil minister said such a move is possible. He also said it would depend on market conditions whether to extend this agreement beyond 2018 or to reach a permanent agreement between OPEC and non-OPEC to support market stability. Benchmark crude oil futures for May delivery rose 30 cents or 0.5 percent to settle at $66.52 a barrel on the New York Mercantile Exchange. June Brent crude gained 16 cents or 0.2 percent to settle at $71.58 a barrel on London's Intercontinental Exchange.


Taking the losses further for the second straight day against the US dollar, Indian rupee ended weaker on Tuesday, on continued demand for the American unit coupled with its growing strength overseas. Traders remained concerned with former President Pranab Mukherjee's statement that the country's demographic dividend runs the risk of turning into a demographic disaster if employment is not generated. He added that the country has achieved an economic growth of 6-8% in the last couple of decades but the inequality among different classes of the society is still huge and unacceptable. Investors failed to take support with the India Meteorological Department (IMD) forecasting that India will receive normal monsoon for a third consecutive year. On the global front, dollar rebounded on Tuesday, partly boosted by a drop in the pound after a disappointing reading on UK wage growth put the brakes on the recent sterling rally. Finally, the rupee ended at 65.64, 15 paise weaker from its previous close of 65.49 on Monday.


The FIIs as per Tuesday's data were net sellers in equity and debt segments both. In the equity segment, the gross buying was of Rs 3934.48 crore against gross selling of Rs 4283.09 crore, while in the debt segment, the gross purchase was of Rs 345.64 crore with gross sales of Rs 1438.50 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.21 crore against gross selling of Rs 0.09 crore.


The US markets ended higher on Tuesday as traders reacted positively to a report from the Commerce Department showing a rebound in housing starts in the month of March. The report said housing starts jumped by 1.9 percent to an annual rate of 1.319 million in March after tumbling by 3.3 percent to a revised 1.295 million in February. Asian markets were trading mostly in green, as investor confidence stayed firm on the back of Wall Street's advance following strong earnings. Indian equity markets extended their winning streak to a ninth straight session on Tuesday after the IMD forecast that the country will receive normal monsoon for a third consecutive year. Today, the markets are likely to make an optimistic start amid firm global cues. Traders will get some encouragement with International Monetary Fund's (IMF) statement that India's GDP growth will accelerate in the current and next fiscal years as structural reforms raise potential output. GDP is forecast to grow 7.4 percent in the current fiscal from 6.7 percent in FY18 and accelerate further in FY20 to 7.8 percent. Market participants will also get some support with Commerce and Industry & Aviation Suresh Prabhu's statement that the government is working with the US to resolve all trade issues even as America has decided to review India's eligibility to enjoy duty-free access for certain products under a tax benefit scheme. Meanwhile, the group of ministers (GoM) on Tuesday worked out a revamped return for goods and services tax (GST) to help ease the burden on businesses. Stocks related to sugar sector will get some boost with report that India's sugar production has touched an all-time high of 29.98 million tonnes till April 15 in the current season on higher cane output, leading to a surge in arrears to farmers at over Rs 20,000 crore. There will be some important earnings announcements too, to keep the markets buzzing.


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