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NSE Intra-day chart (18 October 2016)
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Market Commentary 19 October 2016
Markets to extend gains with a positive start


Value buying, coupled with broadly positive global cues and raising hopes of rate cut by the central bank following easing inflationary pressures lifted the Indian equity markets on Tuesday.  Investors continued to build hefty positions across the board as sentiments got a boost after mixed US economic data helped ease worries about a possible rate hike by the Federal Reserve in November. On the domestic front, investors' morale remained upbeat with private report stating 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. Besides, appreciation in Indian rupee against dollar added to the optimistic sentiments.  Some support also came with Global rating agency Moody's report that the draft bill to establish a new regime for resolution of troubled banks in India is credit positive, as it will help to enhance overall stability of the financial system. The draft bill which seeks to establish Resolution Corporation will have to go through multiple steps before becoming law. Meanwhile, investors were keeping an eye on the government meeting on the goods and services tax (GST) for clarity on rates. The three-day meeting of the GST Council, comprising federal and state finance ministers, will decide the main tax rate and those for different sectors. Almost 20-25 per cent of all taxable goods, including those consumed by the middle class, could come under the peak rate. On the global front, Asian share markets ended higher on Tuesday, while European markets were trading sharply higher in early deals. Back home, the local benchmark indices got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. The bourses further capitalized on the momentum and spurted in noon trades on the back of broad based bottom fishing in undervalued stocks. The northbound journey only concluded with the close of the session helping the key gauges in recovering the ground lost in last one week. Finally, the BSE Sensex surged 520.91 points or 1.89% to 28050.88, while the CNX Nifty ended up by 157.50 points or 1.85% to 8,677.90.


The US markets closed higher on Tuesday, as the latest round of corporate earnings came in ahead of Wall Street's estimates, helping to buoy market sentiment. The dollar stepped back from seven-month high against an index of currencies after US consumer prices showed underlying inflation moderated slightly, prompting markets to trim bets on a December Federal Reserve rate hike. On the economy front, more expensive gas and rising housing costs boosted consumer inflation in September by the largest amount in five months, keeping the Federal Reserve on the cusp of raising US interest rates. The consumer price index climbed 0.3% last month. The cost of shelter - rent, new homes and previously owned homes - rose at the fastest pace since May. Energy prices, mainly gas, also posted the biggest increase since early spring. That largely accounted for higher consumer inflation in September. The Dow Jones Industrial Average added 75.54 points or 0.42 percent to 18,161.94, Nasdaq gained 44.02 points or 0.85 percent to 5,243.84, while S&P 500 was up 13.10 points or 0.62 percent to 2,139.60. 


Crude oil futures bounced back on Tuesday and Nymex crude inched back above $50 a barrel amid headlines from a key oil and gas conference attended by OEPC's secretary general Mohammed Barkindo who expressed confidence that Russia and certain OPEC members will curb production in order to stabilize oil markets. A drop in the U.S. dollar away from seven-month highs also supported crude, as a lower greenback makes fuel purchases cheaper for countries using other currencies. Benchmark crude oil futures for November delivery gained $0.35 or 0.7 percent to close at $50.29 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for December delivery was up by $0.47 or 0.90 percent to $51.99 a barrel on the ICE.


Indian rupee ended one-week high against US dollar on account of fresh selling of American currency by banks and exporters. The domestic currency looked strong from the very beginning and was supported by strong rally in local equity market. Sentiments remained up-beat with Global rating agency Moody's report that the draft bill to establish a new regime for resolution of troubled banks in India is credit positive, as it will help to enhance overall stability of the financial system. The draft bill which seeks to establish Resolution Corporation will have to go through multiple steps before becoming law. Dollar weakened against other currencies overseas on an unexpected fall in US manufacturing index too supported the rupee uptrend. On the global front, Euro remained flat against dollar ahead of an upcoming European Central Bank (ECB) meeting later in the week. Finally, the rupee ended at 66.72, 17 paise stronger from its previous close of 66.89 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 4762.49 crore against gross sell of Rs 4982.15 crore, while in the debt segment, the gross purchase was of Rs 975.82 crore with gross sales of Rs 2032.53 crore. 


The US markets closed higher in last session but were well off the day's high. Traders picked up stocks at reduced levels amid latest batch of good corporate results, while on economy front consumer prices rose in line with estimates in the month of September. The Asian markets have made mostly a positive start, extending their last session gains on added evidence that the Chinese economy has stabilized after China reported a 6.7 percent increase in its gross domestic product for the third quarter. The Indian markets rallied vehemently in last session, with Sensex posting its biggest single-day gain in nearly five months and Nifty in a year. Today, the start is likely to be in green on positive global cues but some profit taking too may appear after the huge rally of last session. Meanwhile, the GST Council meeting on Tuesday headed by Finance Minister Arun Jaitley discussed a four-slab GST tax structure of 6, 12, 18 and 26 percent with lower rates for essential items and the highest for luxury goods that will also be levied with an additional cess. Jaitley also informed that the GST Council meeting has reached a consensus on definition of revenue to compensate states for revenue loss from GST implementation. Traders will also be reacting to minutes of the Monetary Policy Committee (MPC) debut meeting, which unanimously agreed to reduce repo rate on a broad concerns over economic growth and relief from the pullback in inflation. Should RBI decide to carry on in this line, the chances of further rate cuts will grow. There will be some buzz in the auto sector, as the road transport ministry has said that Form 22 under the Central Motor Vehicles Act, 1989, has been amended. From April next year manufacturers would have to provide initial certificate of compliance with pollution standards, safety standards of components quality and road-worthiness certificate for all vehicles. There will be lots of important earnings announcements too, to keep the markets buzzing.


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  • Coal India, the world's largest coal miner by output, is reportedly planning to put up more coal for e-auctions.
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