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NSE Intra-day chart (18 December 2017)
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Market Commentary 19 December 2017
Markets to remain firm with a positive start

Extending gaining streak for third straight day, Indian equity benchmarks ended the Monday's trade with a gain of around half a percent, as Prime Minister Narendra Modi-led BJP looked set to win key polls in Himachal Pradesh and Gujarat. Markets made dismal start with Sensex and Nifty tumbling below their crucial 32,600 and 10,100 levels in early deals, as early trends had suggested that the BJP and the Congress are locked in a tight race to win Gujarat. However, domestic markets staged splendid recovery and entered into green terrain after the ruling party -- BJP -- made a comeback against Congress in Himachal Pradesh and Gujarat election results. Sentiments also remained up-beat with data from the commerce department, which showed that India's exports rose at a faster clip in November, reversing the contraction in the previous month. Exports grew 30.6% in November from a year ago, while imports rose 19.6%. Traders also took some encouragement with statement of an UN expert that India can achieve an 8% growth rate for the next two decades by promoting investment and improving the living conditions of its people. Sentiments also remained optimistic with Reserve Bank of India (RBI) Governor Urjit Patel's statement that with growth picking up in the second quarter of the current financial year, the economic slowdown may have bottomed out. He said “our recent growth numbers may have disappointed some in the first quarter of this fiscal year, but the second quarter has recorded an uptick and the slowdown may well be bottoming out”. Traders also took some support with report that foreign investors are flocking to the Indian capital markets in a big way with a net inflow of over $30 billion (more than Rs 2 lakh crore) of so-called hot money in 2017, with equities alone getting over $8 billion -- an amount bigger than the cumulative investment of the previous two years. Finally, the BSE Sensex surged 138.71 points or 0.41% to 33,601.68, while the CNX Nifty was up by 55.50 points or 0.54% to 10,388.75.


The US markets closed higher on Monday, with major indexes ending at records, on growing confidence that congressional Republicans will succeed in passing tax-cut legislation as early as this week. Treasury Secretary Steven Mnuchin said he has no doubt that the GOP's tax bill will make it to the desk of President Donald Trump this week. Optimism that the Republicans will have the votes they need for passage built last week after two holdouts, Sens. Bob Corker of Tennessee and Marco Rubio of Florida, pledged their support for the tax overhaul. On the economy front, the National Association of Home Builders' monthly sentiment index surged five points to 74 in December, its highest reading since 1999. In November, the sub-index of current conditions rose four points to 81, while the gauge of future sales rose three points to 79. The sub-index that tracks buyer traffic jumped eight points to 58, its highest since 1998. Builders seem to be in a sweet spot. The Dow Jones Industrial Average added 140.46 points or 0.57 percent to 24,792.20, the Nasdaq gained 58.177 points or 0.84 percent to 6,994.76, and the S&P 500 edged higher by 14.35 points or 0.54 percent to 2,690.16.


Crude oil futures turned lower on Monday as the U.S. dollar strengthened and as rising US output offset support from the Forties pipeline shutdown. It was reported that the hairline crack which caused the pipeline outage "has not propagated". The pipeline outage, however, is expected to continue to support Brent prices as "there is no reliable information" concerning the length of time the pipeline will be out of operation. Meanwhile, Nigeria's Pengassan oil union launched a strike on Monday. The strike comes after talks with the government over unfair labor practices ended in deadlock. Benchmark crude oil futures for January delivery ended lower by $0.14 or 0.15 percent at $57.16 a barrel on the New York Mercantile Exchange. Brent crude for February delivery was down by $0.08 to $63.15 a barrel on the ICE.


Indian rupee pared most of its early losses but still ended weaker against the American currency on Monday, due to fresh dollar demand from banks and importers. Investors failed to get some support with statement of an UN expert that India can achieve an 8% growth rate for the next two decades by promoting investment and improving the living conditions of its people. However, domestic unit recovered from early losses, as Prime Minister Narendra Modi-led BJP looked set to win key polls in Himachal Pradesh and Gujarat. On the global front, dollar dipped against a basket of major currencies on Monday, on caution ahead of a vote in US Congress on tax reform, after the bill moved another step closer to ratification over the weekend. Finally, the rupee ended at 64.23, 19 paise weaker from its previous close of 64.04 on Friday.


The FIIs as per Monday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 9274.29 crore against gross selling of Rs 10144.34 crore, while in the debt segment, the gross purchase was of Rs 1334.50 crore with gross sales of Rs 930.38 crore.


The US markets extended their gains to the new week and ended higher in the last session, with the major averages reaching new record closing highs on optimism about the outlook for Republican tax reform, which would cut corporate and individual tax rates. The Asian markets have mostly made a positive start on hopes that that US legislators are on the brink of passing sweeping tax cuts. The Japanese shares were little changed, though yen gave back gains. The Indian markets despite witnessing a huge volatility, managed to extend gains in the last session after the Prime Minister Modi-led Bharatiya Janata Party (BJP) emerged victorious in both Gujarat and Himachal Pradesh Assembly elections. Today, the start is likely to be in green and the traders will continue getting strength with the assembly election results announced yesterday. However, all eyes will be on global development, as the US House votes on the tax bill later in the day that would cut corporate individual tax rates. Also, there will be some cautiousness in the markets with the government seeking Parliament's approval to spend a net additional Rs 333.8 billion ($ 5.21 billion) in new spending in the fiscal year to March 2018. The additional spending will be on top of an approved spending of $ 334.9 billion in the annual Budget. Meanwhile, rating agency India Ratings in its latest report has warned that the farm debt waivers announced by the five large states together will widen the combined fiscal deficit of the states by Rs 1,07,700 crore or 0.65 percent of GDP this financial year. There will be some action in the tourism and hotel stocks, as the Union Tourism Minister K J Alphons has said that there was no adverse impact of the Goods and Services Tax (GST) rollout on foreign tourist arrivals (FTAs) in the country. The pharma stocks too will be in focus, as the National drug pricing regulator NPPA has said it had notified prices of 65 essential formulations, including those used for the treatment of diabetes, infections, pain and high blood pressure.


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