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NSE Intra-day chart (19 July 2018)
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Market Commentary 20 July 2018
Markets likely to make cautious start ahead of no-confidence motion


Indian equity benchmarks ended the choppy day of trade slightly in red terrain on Thursday, as investors remained watchful for developments in the Parliament on Thursday after the opposition parties tabled a no-confidence motion against Prime Minister Narendra Modi's government. Markets after a positive start turned flat and traded choppy in green and red terrain throughout the day. Sentiments remained downbeat with new World Bank's study report stating that the government's demonetisation during the third quarter of 2016-17 took away up to 7.3 percentage points of growth in the country's Gross Domestic Product (GDP) for that period only, in districts dominated by informal activities. Traders took note of a recent ASSOCHAM-Ashvin Parekh Advisory Services LLP (APAS) joint study stating that a developed corporate bond market is the need of the hour for India as an 8% economic growth cannot be achieved without a robust corporate capex cycle, more so as sole reliance on bank loans is not warranted, particularly when bank lending has been squeezed. However, losses remained capped with as some solace also came with the Asian Development Bank's (ADB) latest report stating that Indian economy is on track to meet fiscal year 2018 projected growth of 7.3% and will further accelerate to 7.6% in 2019. Traders also took note of report that the government has initiated as many as 214 anti-dumping investigations up to December last year against China, with which India has a huge trade deficit. Meanwhile, the trade deficit (difference between imports and exports) with China has increased to $63.12 billion in 2017-18 from $51 billion in the previous fiscal. Market participants got some respite with RBI data showing that banks' credit grew by 12.78% to Rs 86,60,069 crore in the fortnight ended July 6. The data also showed that banks' deposits rose by 8.33% to Rs 114,85,768 crore from Rs 106,01,663 crore in the previous fortnight. Finally, the BSE Sensex slipped 22.21 points or 0.06% to 36,351.23, while the CNX Nifty was down by 23.35 points or 0.21% to 10,957.10.


The US markets ended lower on Thursday on account of profit taking following the uptrend trend seen over the past several sessions. Further, sentiments were remained weak following a mixed round of earnings, with investors battering companies that posted disappointing results. Investors have been bullish on second-quarter results amid projections that earnings overall could jump 20% from the year-ago levels following the US tax reform. A decline in bank shares also pushed the markets down. Bank shares fell broadly as interest rates declined. J.P. Morgan Chase, Citigroup, Bank of America and Morgan Stanley all declined by more than 1%. Besides, traders were also reacting to comments by President Donald Trump, who said that he is not thrilled with interest rate hikes by the Fed. On the economic front, pointing to continuing solid growth in the US economy, the Conference Board released a report showing a bigger than expected increase by its index of leading economic indicators in the month of June. The Conference Board said its leading economic index climbed by 0.5% in June after revised data showed no change in May. Meanwhile, a report from the Labor Department showed that initial jobless claims unexpectedly dropped to their lowest level in almost five decades in the week ended July 14. The Labor Department said initial jobless claims fell to 207,000, a decrease of 8,000 from the previous week's revised level of 215,000. The Dow Jones Industrial Average dropped 134.79 points or 0.53 percent to 25064.50, the S&P 500 declined 11.13 points or 0.40 percent to 2804.49 and the Nasdaq was down by 29.15 points or 0.37 percent to 7825.30.


Crude oil futures ended higher on Thursday after Adeeb Al-Aama, Saudi Arabia's governor to the Organization of the Petroleum Exporting Countries, has said that the kingdom's crude exports are expected to drop by roughly 100,000 barrels a day, in August from a month earlier. He also said that concerns over an oversupply are without basis and that the Saudis does not try to push oil into the market beyond customer needs. However, Brent crude price settled slightly lower following an end to an oil-workers' strike in Norway that began more than a week ago. Benchmark crude oil futures for August rose 70 cents or 1 percent to settle at $69.46 a barrel on the New York Mercantile Exchange. September Brent crude declined 32 cents or 0.4 percent at $72.58 a barrel on London's Intercontinental Exchange.


Indian rupee breached the psychological 69 per dollar mark and ended considerably weaker against dollar on Thursday, hurt by fresh demand for the American currency from importers. The rupee sentiment was hit as participants remained wary ahead of debate on the no-confidence motion moved against the Modi Government on Friday. Sentiments weakened further with new World Bank's study report stating that the government's demonetisation during the third quarter of 2016-17 took away up to 7.3 percentage points of growth in the country's Gross Domestic Product (GDP) for that period only, in districts dominated by informal activities. Moreover, the domestic currency was also weighed down by dollar's strengthen against some other currencies overseas. On the global front, dollar hit one-year highs against a currency basket on Thursday, after bullish comments be Federal Reserve Chairman Jerome Powell cemented expectations for two more rate hikes this year. Finally, the rupee ended at 69.05, 43 paise weaker from its previous close of 68.62 on Wednesday.


The FIIs as per Thursday'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 4644.94 crore against gross selling of Rs 4647.25 crore, while in the debt segment, the gross purchase was of Rs 1700.83 crore with gross sales of Rs 1129.60 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.34 crore against gross selling of Rs 24.27 crore.


The US markets ended lower on Thursday, as a deal to toughen foreign-investment reviews stoked trade tensions and a round of lukewarm corporate-earnings reports weighed on sentiment. Asian markets were trading mixed on Friday, as investor caution prevailed amid concerns about the European Union imposing retaliatory tariffs on US goods, while US President Donald Trump's criticism of Federal Reserve policy knocked the dollar. Indian equity benchmarks ended Thursday's session with marginal losses, tacking weak trade in Asian counterparts. Today, the markets are likely to make cautious start ahead of voting on a no-trust motion against the NDA government. The parliament will debate a no-confidence motion tabled by opposition parties against the Prime Minister Narendra Modi's government, the first day of the monsoon session. Investors will also be looking ahead the Goods and Services Tax (GST) Council meeting to be held on July 21, where it will consider to cut tax rate on 30-40 items across multiple slabs. There will be some cautiousness with ICRA's report that India's current account deficit (CAD) is set to widen and the first quarter print may come in at $16-17 billion or 2.5% of Gross Domestic Product (GDP) and added that for the full year the gap may scale a six-year high of $67-72 billion. Traders will also be reacting to Commerce Secretary Rita Teaotia's statement that there was a real possibility that India could lose the trade dispute that the US had filed in the World Trade Organization (WTO) on export subsidies. She said this was because income levels in India had crossed the threshold for exports to be subsidised. However, traders may take some support later in the day with Asian Development Bank's (ADB) new report that South Asia continues to be the fastest growing sub-region, led by India, whose economy is on track to meet fiscal year 2018 projected growth of 7.3% and further accelerating to 7.6% in 2019, as measures taken to strengthen the banking system and tax reform boost investment. There will be some support with industry body Ficci's statement that despite short-term challenges, India's economic growth story remains intact and the country's GDP is expected to grow around 7.5% in the current financial year.  There will be some important earnings announcements too to keep the markets buzzing.


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