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NSE Intra-day chart (19 June 2018)
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Market Commentary 20 June 2018
Markets to make negative start on sluggish global cues


Indian equity benchmarks ended Tuesday's session on pessimistic note, following weakness in the global peers on US-China trade tensions. After a negative opening, the markets traded lackluster throughout the session as domestic sentiments remained cautious with Commerce and Industry Minister Suresh Prabhu's statement that global trade is facing headwinds and these challenges are needed to be tackled properly to boost world economy. He also said that the US decision to impose high import duties on certain steel and aluminium products have led to a trade war kind of situation, with other countries too raising their tariff walls. Adding some pessimism, Commerce Secretary Rita Teaotia said that exporters, particularly from the food and agriculture sectors, should strictly comply with global norms for quality and standards, or else they might lose their export market share to other countries. Separately, former chairman of the empowered committee on GST, Amit Mitra said that around Rs 25,000 crore refund is pending for the exporters while more than 3 lakh applications seeking refunds have piled up with the central government. He also said that the exporters are suffering hugely for this. Further, in the last leg of the trade, the key indices extended their losses to end near their intraday low points, as sentiments weakened further amid India Ratings' report that the adverse conditions in the interest rate market, increasing risk aversion by state-run banks, volatile external environment and limited access to alternative financing options as critical drivers for corporate credit quality in FY19, especially for weak entities. The markets participants even overlooked Interim Finance Minister Piyush Goyal's statement that the government is hopeful of achieving double-digit gross domestic product (GDP) growth in the country by the fourth quarter of the ongoing financial year. He stated that there is a demand uptick in the economy and India is a market place of billions of aspirational consumers. Finally, the BSE Sensex declined 261.52 points or 0.74% to 35,286.74, while the CNX Nifty was down by 89.40 points or 0.83% to 10,710.45.


The US markets ended sharply in red terrain on Tuesday after President Donald Trump directed U.S. Trade Representative Robert Lighthizer to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. The announcement represented the latest escalation in a tit-for-tat dispute between the No. 1 and 2 largest economies in the world. Trump further said the tariffs will go into effect if China refuses to change its unfair trade practices and insists on going forward with recently announced tariffs. The potential tariffs announced by Trump come as the U.S. and China both announced plans to impose tariffs on up to $50 billion worth of goods imported from the other country. Moreover, he stated that the United States will no longer be taken advantage of on trade by China and other countries in the world. Besides, The China's Ministry of Commerce said China will have no choice but to take comprehensive measures in response to the U.S.'s trade moves. On the economic front, the Commerce Department released a report showing a much bigger than expected jump in new residential construction in the month of May, although the report also showed a much steeper than expected drop in building permits. The report said housing starts spiked by 5.0 percent to an annual rate of 1.350 million in May after tumbling by 3.1 percent to a revised rate of 1.286 million in April. Street had expected housing starts to climb by 1.8 percent to a rate of 1.310 million from the 1.287 million originally reported for the previous month. The Dow Jones Industrial Average declined 287.26 points or 1.15 percent to 24700.21, the S&P 500 was down by 11.16 points or 0.40% to 2762.59, while the Nasdaq fell 21.44 points or 0.28 percent to 7725.58.


Crude oil futures ended lower on Tuesday on expectations that OPEC and other major oil producers will announce a decision later this week to raise production. OPEC members and a group of non-cartel producers led by Russia are expected to increase production at the meeting, but the main producers appear to disagree on the size of an increase.  As per Ecuador, Saudi Arabia and Russia will propose that oil production be raised by 1.5 million barrels per day-in line with Russia's position. The losses for oil came as rhetoric between the U.S. and China intensified after Trump threatened Beijing with more tariffs. Trump said that he might slap an additional $200 billion or more in tariffs on Chinese goods, on top of the $50 billion his administration has already detailed. Benchmark crude oil futures for July delivery declined 78 cents or 1.2 percent to settle at $65.07 a barrel on the New York Mercantile Exchange. August Brent crude fell 26 cents or 0.4% at $75.08 a barrel on London's Intercontinental Exchange.


Indian rupee depreciated to near one-month low against dollar on Tuesday, tracking losses in global equity markets as traders were cautious due to escalating trade frictions between the US and China. Sentiments remained down-beat with a private report that the Indian rupee would continue to witness pressure in the coming days, but it should get respite in the medium term as trade protectionism ends up hurting the US economy, a net importer of goods. Traders also remain concerned with Commerce and Industry Minister Suresh Prabhu's statement that global trade is facing headwinds and these challenges are needed to be tackled properly to boost world economy. Besides, extremely bullish dollar sentiment overseas as well as sluggish equity markets also adversely impacted local forex trade. Finally, the rupee ended at 68.38, 40 paise weaker from its previous close of 67.98 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 3583.98 crore against gross selling of Rs 3990.69 crore, while in the debt segment, the gross purchase was of Rs 946.32 crore with gross sales of Rs 1691.62 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.54 crore against gross selling of Rs 1.53 crore.


The US markets ended sharply lower on Tuesday on fears that the United States and China may be veering toward an all-out trade war. Asian markets were trading mixed on Wednesday as traders anticipated the next development in US-China trade tensions after a ratcheting up of rhetoric sparked a global sell-off on Tuesday. Indian equity markets ended lower on Tuesday, as traders eyed looming trade wars after US President Donald Trump threatened new tariffs on $200 billion of Chinese goods and Beijing vowed to immediately retaliate. Today, the start is likely to be on negative side, mirroring weak global cues as an escalating trade spat between the world's two biggest economies sparked concerns over the future of global trade. However, traders may get some support with Economic Affairs Secretary Subhash Chandra Garg's statement that it is a plausible aspiration for India to become a $10 trillion economy by 2030. He also said that current account deficit (CAD) at 2.5% of GDP won't be a worry as the government has the required instruments to deal with any imbalance created due to foreign fund outflow. Traders will also be reacting to global rating agency, Moody's latest report that non-financial corporates in the country may show modest improvement in their leverage levels in the current financial year, supported by higher revenue and earnings growth. There will be some buzz in the aviation related stocks with the Directorate General of Civil Aviation's (DGCA) data indicating that domestic air passenger traffic grew 16.53% to 11.86 million in May this year over the same period a year ago. It added that 12 domestic airlines together flew 11.85 million passengers as compared to 10.17 million passengers in May 2017. State-run banks stocks will remain in focus on meeting the credit demands of 4,500 good borrowers besides micro, small and medium enterprises (MSMEs) as the government looks to these lenders to help revive growth.


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