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NSE Intra-day chart (17 October 2016)
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Market Commentary 18 October 2016
Markets to see some recovery with a positive start


Lower earnings guidance from IT majors, along with heightened chances of a US rate hike dragged the Indian equity markets lower on Monday. Besides, weak trade in Asian markets, hike in petroleum product prices and a massive outflow of foreign funds during the last week eroded investors' confidence. Investors remained cautious over weakness in the rupee against the dollar after the country's foreign exchange reserves declined by a whopping $4.343 billion to $367.646 billion in the week to October 7, 2016. Indian rupee weakened by 12 paise to trade at 66.83 against the US dollar at the time of equity markets closing. Also, a study claimed that as many as 550 jobs have disappeared every day in last four years and if this trend continues, employment would shrink by 7 million by 2050 in the country. However, major losses were restricted with Prime Minister Narendra Modi's assertion that results of the reforms undertaken by his government were visible and the country has transformed into 'one of the most open economies' in the world with a strong growth rate. Some support also came with report that India's export during September 2016 has shown sign of revival, registering a growth of 4.62 per cent in dollar term to $22.88 billion as compared to $21.86 billion in September 2015. On the global front, Asian markets ended mixed on Monday, as investors avoided taking risks, while European markets started the week on softer note as investors remained cautious ahead of earnings. Back home, after starting the session on cautious note, the local benchmarks continued to trade near neutral line throughout the morning session as investors await key earnings for further signs of economic revival. However, sharp selling observed in noon session, which led to benchmark indices falling for the lowest point of the day as selloff in Chinese shares raised concerns around global growth. Some late short covering in blue-chip ensured that local bourses go home with relatively small losses. Finally, the BSE Sensex declined by 143.63 points or 0.52% to 27529.97, while the CNX Nifty dropped 63 points or 0.73% to 8,520.40.


The US markets closed lower on Monday, as warnings about accelerating inflation coupled with crude-oil trading below $50 a barrel overshadowed strong earnings. Fed Vice Chair Stanley Fischer stated that the Federal Reserve is very close to its US employment and inflation targets, as he warned against making rash changes to the policy framework in an effort to boost economic growth. Fischer added that a world where low growth hamstrings central banks from effective recession-fighting, the US economy may face longer and deeper recessions in the future if interest rates remain stuck at current low levels. On the economy front, a gauge of New York-area manufacturing became more pessimistic in October. The Empire State index fell to negative 6.8 from negative 2 in September, on a scale where any reading below zero indicates contracting activity. That's the weakest reading since May. The index for new orders improved slightly but was still negative at minus 5.6. The Dow Jones Industrial Average lost 51.98 points or 0.29 percent to 18,086.40, Nasdaq dropped 14.34 points or 0.28 percent to 5,199.82, while S&P 500 was down 6.48 points or 0.30 percent to 2,126.50. 


Crude oil futures declined on Monday, with Nymex crude once again slipping below $50 a barrel amid signs that Iran will pick up the slack when Saudi Arabia and Russia curb output. The trade was weighed by oversupply concerns, with a spike in trade volume. Though during the day prices showed some upmove after the US Energy Information Administration (EIA) showed shale oil production was expected to fall by 30,000 barrels per day (bdp) in November. Benchmark crude oil futures for November delivery dropped $0.41 or 0.8 percent to close at $49.94 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for December delivery declined by $0.43 or 0.8 percent to $51.52 a barrel on the ICE.


Indian rupee depreciated against dollar on Monday due to demand for the dollar from importers and banks. The fall in foreign exchange reserve also dampened the sentiments. Reserve Bank of India data showed that foreign exchange reserves declined by a huge $4.343 billion to $367.646 billion in the week to 7 October, as the country gears up for a massive dollar outflow due to billions of dollars in deposits nearing their maturity. Dollar strengthened against some other currencies overseas on the prospects of higher U.S. rates also weighed on the rupee. On the global front, yen held a three-week decline against the dollar as hedge funds trimmed bullish bets on the Japanese currency by the most since May and speculation increased that the Federal Reserve will raise interest rates this year.  Finally, the rupee ended at 66.89, 18 paise weaker from its previous close of 66.71 on Friday.


The FIIs as per Monday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3990.99 crore against gross sell of Rs 4936.40 crore, while in the debt segment, the gross purchase was of Rs 1793.35 crore with gross sales of Rs 2400.75 crore. 


The US markets made a lackluster start of the new week and ended modestly lower in the last session and the major averages fell to their lowest closing levels in a month on getting some weak economic data. The Asian markets have made mostly a positive start on hopes that US monetary policy will remain accommodative after some disappointing economic data including a smaller than expected increase in industrial production in September. The Indian markets losing their momentum in the second half declined by around half a percent in last session, tracking weak cues from Asia and Europe. Today, the start is likely to be in green tailing the regional markets. Also, a private report has said that India's current account deficit is likely to stay below 1 per cent of GDP this year, largely due to a sharp fall in the trade deficit as against last year. Marketmen will be eyeing the crucial three-day meeting of the all-powerful GST Council, starting today, which will decide on the tax rate and sort out issues like compensation formula for rollout of the new indirect tax regime from April 1, 2017. There will be some buzz in the PSU stocks, as the cabinet is expected to clear the plan to cut majority stake in around 20 state-run firms on Wednesday, including several profit-making entities, signaling a restart of equity sale in public sector companies after a 12-year gap.  Consumer goods stocks too may see some action on an Assocham report that riding high on an uptick in the economy and improving perception of job prospects, coupled with steady lowering of interest rates, consumer demand may soar 40 percent in the ongoing festive season.


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  • Cipla has inked a memorandum of agreement for South Africa's first biosimilars manufacturing facility to be set up at a cost of nearly $91 million.                                                  
  • Tata Motors is planning to expand its footprint in South India in the commercial vehicle segment.
  • Bharti Airtel has reportedly started a 360 degree campaign to promote its updated My Airtel app, which provides access to a curated set of apps, along with new features and free calling minutes
  • Axis Bank has reduced its marginal cost of funds based lending rate by 5 basis points with effect from October 18, 2016.
  • UltraTech Cement has reported 31.40% rise in its net profit at Rs 601.05 crore for the quarter ended September 30, 2016 as compared to Rs 457.41 crore for the same quarter in the previous year.
News Analysis