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NSE Intra-day chart (18 July 2016)
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Market Commentary 19 July 2016
Markets to make a positive start on mostly upbeat global cues


Indian stocks markets turned volte-face on the first day of a new trading week, as what started on an optimistic note ended as a gloomy show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory for second consecutive session despite getting off to a gap-up opening. Investors remained cautious over the monsoon session of Parliament which started today with key economic bills including the long pending GST Bill lined up to be passed. According to reports, the Opposition is likely to take aim at the government on several issues, including the recent Supreme Court verdict on Arunachal Pradesh, the recent developments regarding the Uniform Civil Code and India's unsuccessful bid to gain membership in the Nuclear Suppliers Group. However, investors got some comfort with the report that planting of crops has jumped 38 per cent in the past one week as monsoon rains have significantly increased since the end of June and have covered almost the entire country, raising hopes of much higher farm production than last year and moderate prices of pulses and rice. Water levels in reservoirs have also filled up to the average level, which is good for post-monsoon irrigation and hydropower generation. Some support also came with the industry chamber CII's report indicating that Indian industry remained upbeat about the business environment in the first quarter ended June owing to salary hikes recommended by the Seventh Pay Commission, progress of monsoons and the government's proactive reforms agenda. The CII Business Confidence Index (BCI) has improved to 57.2 in April-June 2016, from 54.1 in the previous quarter.On the global front, Asian markets ended mostly in green on Monday. Back home, the benchmark got off to a rollicking opening as investors rejoiced the report that exports snapped18-month downward spiral and rose by 1.27% in June 2016. Thereafter, the indices in no time climbed to intraday highs and traded around the psychological 28,000 (Sensex) and 8,550 (Nifty) levels through the morning trades. But the optimism started showing signs of easing in late hours of trade with profit booking in few sectors and drifting European markets weighed down the local bourses by the end of session. Finally, the BSE Sensex ended lower by 89.84 points or 0.32% to 27746.66, while the CNX Nifty dropped 32.70 points or 0.38% to 8,508.70. 


The US markets closed higher on Monday, as Bank of America's quarterly results helped investor gain confidence going into earnings season, pushing both the Dow Jones Industrial Average and the S&P 500 Index to fresh all-time closing highs and the Nasdaq Composite Index to its highest finish of 2016. The S&P 500 also ended up led by information technology and consumer discretionary sectors.  On the economy front, a closely-watched index of home builder confidence eased one point in July. The National Association of Home Builders' index fell to 59 after four months of no change followed by an uptick in June. All three of the index's sub-gauges slipped. The index of current conditions eased one point to 63, while the gauge for the upcoming six months fell three points to 66. Buyer traffic was down one point to 45. Any reading over 50 signals improvement. The Dow Jones Industrial Average was up by 16.50 points or 0.09 percent to 18,533.05, Nasdaq added 26.19 points or 0.52 percent to 5,022.78 and S&P 500 gained 5.15 points or 0.24 percent to 2,166.89. 


Crude oil futures slumped on Monday, dropping back towards two-month lows amid signs of an ongoing recovery in U.S. drilling activity. Traders remained concerned with Baker Hughes late Friday report that the number of rigs drilling for oil in the U.S. increased by six last week to 357, the third straight weekly gain. Benchmark crude oil futures for August delivery was up $0.81 or 1.74 percent to close at $45.84 a barrel after trading in a range of $45.51 and $46.08 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for September delivery gained $0.78 or 1.64 percent to $46.83 a barrel on the ICE.


Indian rupee ended weaker against dollar on Monday due to fresh demand for American currency from banks and importers. Besides, some losses in local equity markets and dollar gains against other currencies overseas too hit the rupee sentiment. Investors remained cautious with the Monsoon session of the Parliament starting from today amid hopes the government will be able to pass the Goods and Services Tax Bill that is now stuck in the Upper House. On the global front, the yen fell against the dollar on Monday as investors unwound a surge of safe-haven trades done on the back of reports of an attempted military coup in Turkey on Friday. Finally, the rupee ended 67.19, 12 paise weaker from its previous close at 67.07 on Friday.


The FIIs as per Monday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 5838.75 crore against gross sell of Rs 4429.50 crore. While in the debt segment, the gross purchase was of Rs 710.94 crore with gross sales of Rs 456.22 crore.


The US markets despite a subdued trading, ended modestly higher in the last session. With the Dow and the S&P 500 surging to new record closing highs on upbeat earnings news from financial giant Bank of America., though there was unexpected drop in homebuilder confidence in the month of July. The Asian markets have made mostly a lower start with some indices trading down by around half a percent, retreating from their highest level since April as oil fell. Though, the Japanese market coming after a long weekend was trading higher. The Indian markets gave up all the gains in final hours of last session and lost over quarter of a percent. Today, the start is likely to remain positive but cautious on mixed regional cues, though there can be recovery too with the global rating agency reaffirming India's 'BBB-' rating with a stable outlook, while saying it would produce a 7.7 per cent growth rate for FY2017. However, Fitch expressed concern over deteriorating private investment and the still weak fiscal position. Meanwhile, the global financial services major Morgan Stanley too has revised upwards its India growth estimate for this year to 7.7 percent from 7.5 percent earlier, because of 'positive surprises' in the macro data. Chief economic adviser (CEA) to the finance ministry Arvind Subramanian has said that the Indian economy can grow at more than 8 per cent in the next decade if global economic environment remains supportive. IT stocks once again be in focus with another bellwether Wipro announcing its numbers later in the day and is expected to report weak earnings hurt by wage hike. There will be other major important earnings too to keep the markets buzzing.


                           Support and Resistance: CNX Nifty and BSE Sensex


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  • Reliance Industries has reportedly clubbed its 361 company owned-company operated fuel retail pumps with its organised retail business as part of its strategy to develop retail offerings at these petrol pumps.
  • Dr. Reddy's Laboratories has launched Omeprazole and Sodium bicarbonate capsules, 20mg/1100mg and 40mg/1100mg, a therapeutic equivalent generic version of ZEGERID capsules in the United States market.
  • Sun Pharma Advanced Research Company and its parent Sun Pharma have entered into a licensing pact for its Elepsia tablets, used in the treatment of epilepsy, in the US market for an upfront payment of $10 million.
  • ICICI Bank's subsidiary company, ICICI Prudential Life Insurance Company has filed a draft red herring prospectus with the SEBI for a public offer.
  • Reserve Bank of India has allowed Axis Bank to raise its foreign investment limit up to 74% of paid-up capital.
News Analysis