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NSE Intra-day chart (18 May 2018)
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Market Commentary 21 May 2018
Markets likely to start in green terrain on positive Asian cues

 

Indian equity benchmarks extended southward journey for fourth straight session to end below their crucial 34,900 (Sensex) and 10,600 (Nifty) levels, as doubts whether the Bharatiya Janata Party (BJP) could prove its majority in the southern state of Karnataka weighed on investors' sentiment. Markets started the session on a pessimistic note with a private report stating that Reserve Bank of India is likely to keep policy rates unchanged in the forthcoming monetary policy review, but will have a hawkish tone on concerns over inflation and as crude oil prices remain elevated. Traders shrugged off UN's report that India's economy is projected to grow 7.6% in fiscal year 2018-19, remaining the fastest growing economy in the world, as robust private consumption and benefits from past reforms help the country's GDP gain momentum but sustained recovery in private investment remains a crucial challenge. Market participants failed to get any sense of relief with Niti Aayog CEO Amitabh Kant's statement that crony capitalism in India will come to an end with the new bankruptcy code though it was facing some teething troubles. Markets extended losses in last leg of trade on private report stating that crude oil prices may rise further in the coming months, following which India's current account deficit will be around 2.4% in 2018- 19. Separately, India's oil imports from Iran surged to 640,000 barrels per day (bpd) in April, its highest level since October 2016, according to data from shipping and industry sources, as refiners raised purchases ahead of looming US sanctions against Tehran. Meanwhile, in a major political development, the Supreme Court held a hearing in the Karnataka government formation matter, directing that the Bharatiya Janata Party (BJP) leader and the state's new chief minister, B S Yeddyurappa, must conduct the floor test on Saturday at 4 pm. Finally, the BSE Sensex declined 300.82 points or 0.86% to 34,848.30, while the CNX Nifty was down by 86.30 points or 0.81% to 10,596.40.

 

The US markets closed lower on Friday, with major indices posting modest weekly declines as investors grappled with lingering uncertainty over trade negotiations between the US and China, as well as bond yields that climbed this week to the highest level since 2011. Cleveland Fed President Loretta Mester said that rules adopted after the financial crisis that have made big US banks more resilient over the last decade should be tested in the next downturn before they are reduced in any major way. The official added that the US economic outlook is as strong as it has been in a long time. But that does not mean that little-tested, so-called countercyclical standards, which would raise requirements on banks during good times and ahead of a downturn, should be tightened. Mester added that instead, existing capital and liquidity standards should be set somewhat higher than they would be if we had more experience with and confidence in the countercyclical tools. Meanwhile, interest rates on US 30-year fixed-rate mortgages rose to the highest in seven years as a bond market selloff this week propelled 10-year yields to the highest since July 2011. The US mortgage finance agency added that thirty-year mortgage rates averaged 4.61 percent in the week ended May 17, matching the level last seen in May 2011. A week earlier, 30-year rates averaged 4.55 percent. Average 15-year mortgage rates rose to 4.08 percent in the latest week from 4.01 percent, while interest rates on five-year adjustable mortgages averaged 3.82 percent, up from 3.77 percent a week earlier. The Nasdaq dropped 28.134 points or 0.38 percent to 7,354.34, the S&P 500 was down by 7.16 points or 0.26 percent to 2,712.97, while the Dow Jones Industrial Average added 1.11 points to 24,715.09. 

 

Crude oil futures ended lower on Friday, after wavering between gains and losses in anticipation of renewed US economic sanctions on Iran. Besides, speculation that OPEC supplies are declining, supported the crude prices. Moreover, the overall US rig count continues its climb with a slight gain this week. Baker Hughes' calculation of active US rigs increased by 1 unit during the week ended May 18 to 1,046. Rigs drilling for oil were unchanged at 844 rigs compared with last week, while those rigs targeting natural gas gained 1 unit to 200 rigs. Benchmark crude oil futures for June delivery dropped 21 cents or 0.30 percent to settle at $71.28 a barrel on the New York Mercantile Exchange. July Brent crude slipped 79 cents or 1.00 percent to settle at $78.51 a barrel on London's Intercontinental Exchange.

 

Snapping 2-day winning streak, Indian rupee ended considerably weaker against the American currency on Friday, due to demand for greenback by banks and importers. Sentiments turned pessimistic with a private report stating that Reserve Bank of India is likely to keep policy rates unchanged in the forthcoming monetary policy review, but will have a hawkish tone on concerns over inflation and as crude oil prices remain elevated. Investors paid no heed towards UN's report that India's economy is projected to grow 7.6% in fiscal year 2018-19, remaining the fastest growing economy in the world, as robust private consumption and benefits from past reforms help the country's GDP gain momentum but sustained recovery in private investment remains a crucial challenge. The fall in the rupee was also triggered by dollar's strength against major global currencies overseas along with extremely bearish local equity markets. On the global front, US dollar traded higher against most other major currencies as Treasury yields rose sharply in recent days after solid economic data. Finally, the rupee ended at 68.00, 32 paise weaker from its previous close of 67.68 on Thursday.

 

The FIIs as per Friday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 5180.25 crore against gross selling of Rs 5592.29 crore, while in the debt segment, the gross purchase was of Rs 573.57 crore with gross sales of Rs 857.21 crore. Besides, in the hybrid segment, the gross selling was of Rs 0.29 crore against no buying.

 

The US markets ended mostly lower on Friday, as uncertainty about the outcome of the second round of trade talks between the U.S. and China kept traders on the sidelines. Asian markets are trading mostly in green in early deals on Monday after fears of a trade war between the U.S. and China receded following weekend developments. Indian equity benchmarks ended lower for a fourth straight session on Friday as sustained selling by foreign investors in recent sessions, rising crude oil prices and concerns about near term outlook for the economy weighed on sentiment. Today, the markets are likely to start slightly in green tailing firm Asian peers. Sentiments will get some support with economic affairs secretary Subhash Chandra Garg's statement that India's growth trajectory continues to be stable with strong macroeconomic fundamentals, despite a continual rise in global oil prices and hardening bond yields. He said, the fiscal deficit programme has been going on very smoothly and there has been no reason for us to believe that there will be any greater impact. Traders will also get some support with report that India is the sixth wealthiest country in the world with a total wealth of $8,230 billion, while the US is the richest nation globally. However, there will be some concern on report that even as monsoon is predicted to be normal this year, its uneven distribution could spike food prices, and inflation is likely to edge further. There will be buzz in banking counters as the finance ministry expects banks to write back more than Rs 1 lakh crore after the resolution of all 12 NPA cases referred to insolvency proceedings by the RBI it its first list. Meanwhile, Indostar Capital Finance, which recently concluded its initial public offer, will make stock market debut today. There will be some important earnings announcements too, to keep the markets buzzing.

 

Support and Resistance: NSE (Nifty) and BSE (Sensex)

 

Index

Previous close

Support

Resistance

NSE Nifty

10,596.40

10,565.35

10,651.20

BSE Sensex

34,848.30

34,725.58

35,067.07

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank 

174.70

286.10

282.03

292.73

ITC 

154.22

282.30

277.02

286.57

SBI

118.73

238.85

236.47

242.62

Tata Motors

116.89

304.60

300.40

311.90

Bharti Airtel

112.06

361.35

354.92

367.92

 

  • Reliance Industries' telecom arm -- Jio has entered into exclusive partnership for the Indian market with Screenz. 
  • Bharti Airtel and Amazon India have entered into a strategic partnership, with an aim to jointly drive smartphone adoption across the country.  
  • Tata Motors has signed a MoU with the National Institute of Technology, Trichy. 
  • L&T's construction arm -- L&T Construction -- has bagged orders worth Rs 1,504 crore through Heavy Civil Infrastructure business unit.
News Analysis