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NSE Intra-day chart (19 December 2016)
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Market Commentary 20 December 2016
Markets to continue the somber run on mixed global cues


Indian market commenced the fresh week on a depressing note as the benchmark indices extended previous week's sell-off and sank by close to half a percentage points during the session. Sentiments took a hit after the industry body ASSOCHAM in its latest report said that prospects of interest rate cut in near future may be bleak due to factors like continuous pressure on rupee against dollar, firming of the US interest rates and hardening of crude oil prices. Apart from continued outflows by foreign funds, a weak trend in Asia and concerns of an expected jump in US interest rates next year also weighed on the sentiment. Foreign investors have pulled out more than Rs 19,500 crore from the capital market this month so far. The FPI outflows took place following a withdrawal of over Rs 49,700 crore on net basis from the capital market (equity and debt) in last two months (October-November).  However, investors got some comfort with Finance Minister Arun Jaitley's statement that infrastructure investment needs a booster and his next Budget in February will focus on encouraging more public as well as private spending to boost economic growth. Some support also came with Union Transport Minister Nitin Gadkari's statement that India's infrastructure sector has the potential of boosting GDP growth up to 3% and efforts are being put in by the centre to achieve this objective. Meanwhile, shares of oil marketing companies (OMCs) settled higher in otherwise weak market after these companies raised petrol and diesel prices with effect from midnight of 16th / 17th December 2016. This week, the market is likely to be rangebound as the holiday spirit is expected to keep the market muted on account of less volume on the FII counter. On the global front, Asian markets ended the session on dull note on Monday as investors trimmed their equity holdings following hawkish comments from the US Federal Reserve on interest rate hikes last week. Back home, finally, the BSE Sensex declined by 114.86 points or 0.43% to 26374.70, while the CNX Nifty dropped 35.10 points or 0.43% to 8,104.35.


The US markets closed lower on Friday, with investors somewhat reluctant to make big bets in a preholiday week, while the main benchmarks were sitting near all-time highs set last week. Trading volumes were thinner than usual, with the New York Stock Exchange reporting volume at 60% of the 30-year average. Some still believe the stock markets may not get a so-called Santa Claus rally in the last trading days of 2016 because of the intensity of its recent rise. On the economy front, activity in the US services sector unexpectedly fell in December, dampening optimism over the state of the US economy. In a report, market research group Markit said that its flash services purchasing managers' index (PMI) fell to 53.4 in December, from the prior month's reading of 54.6. On the index, a reading above 50.0 indicates expansion, below indicates contraction. Services make up approximately 80% of the US economy which makes the data key for interpreting growth. The report highlighted that despite the fact that business activity growth eased to a three-month low, there was a robust improvement in new work and job creation hit a nine-month high. The Dow Jones Industrial Average added 39.65 points or 0.20 percent to 19,883.06, Nasdaq was up 20.28 points or 0.37 percent to 5,457.44, while S&P 500 gained 4.46 points or 0.20 percent to 2,262.53.


Crude oil futures though ended in green but witnessed some profit taking on Monday. Traders were concerned about whether the major oil producers will stick to their agreement to cut production next year or not. There are also some worries in the market about production increases in the U.S., where rigs drilling for oil rose to a level not seen in almost a year. Benchmark crude oil futures for January delivery was up by $0.11 or 0.02 percent to $53.06 on the New York Mercantile Exchange. In London, Brent crude for February delivery ended lower by $ 0.25 or 0.45 percent at $54.95 on the ICE.


Indian rupee depreciated against the US dollar on Monday due to fresh demand for the American currency from banks and importers. Rupee sentiments were hit after the industry body ASSOCHAM in its latest report has said that prospects of interest rate cut in near future may be bleak due to factors like continuous pressure on rupee against dollar, firming of the US interest rates and hardening of crude oil prices. Besides, foreign fund outflows coupled with concerns of an expected jump in US interest rates next year also weighed on the rupee sentiment. However, dollar weakened against some currencies overseas because of the mounting tension between the US and China capped the losses. On the global front, dollar retreated from a 10-month high against the yen ahead of a monetary policy decision by the Bank of Japan on Tuesday. Finally, the rupee ended at 67.86, 10 paise weaker from its previous close of 67.76 on Friday.


The FIIs as per Monday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 7138.05 crore against gross selling of Rs 6883.19 crore, while in the debt segment, the gross purchase was of Rs 308.08 crore with gross sales of Rs 1515.69 crore.


The US markets managed a positive close but were well off the day's high, with some traders away from their desks ahead of the upcoming holidays. The Asian markets have made a mixed start as geopolitical concerns intensified after the assassination of Russia's ambassador to Turkey and violent incidents in Germany and Switzerland. The Japanese market was marginally in green with weakness in yen against dollar. The Indian markets made another lower closing after a lackluster trade in the last session. Today, the start is likely to be again mildly in red on mixed global cues. However, markets may see some recovery in the latter part of trade taking some support from NITI Aayog member Ramesh Chand's statement that despite the impact of demonetisation, growth in agriculture for the current year will be still above 5 per cent, though he pointed that the prevailing cash crunch has hit the growers of perishables more compared to those who grow bulk crops such as paddy and cotton. Meanwhile, to promote a "less cash" society, the Finance Ministry has announced that it would provide tax incentives to small traders accepting payments through digital mode. The Ministry said the required legislative amendment will be carried out in the Finance Bill 2017 which will be tabled with the Union Budget 2017-18. Market will also be getting some encouragement with Chairman of the Insolvency and Bankruptcy Board of India, MS Sahoo's statement that the Insolvency and Bankruptcy Code enacted by the government recently is likely to improve ‘ease of doing business' rankings and provide a safe exit for businesses that have failed. The Tata group stocks will keep buzzing with Cyrus Mistry, the sacked chairman of Tata Sons announcing that he was resigning from the board of all listed Tata entities.



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