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NSE Intra-day chart (19 August 2016)
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Market Commentary 22 August 2016
Markets to start F&O series expiry week on a cautious note

Indian benchmarks failed to extend the gaining momentum on Friday as jittery investors chose to take some profits off the table amid hawkish comments from New York Fed President William Dudley and San Francisco Fed President John Williams over US interest-rate increases. Apart from the global concerns, markets also witnessed some disappointing developments on the domestic front which did not augur well with investor's sentiments such as Indian rupee, which weakened for the second consecutive session against the US dollar. Market participants also remained cautious ahead of the announcement of a new governor for the Reserve Bank of India (RBI) expected anytime now. However, losses remained capped as Moody's Investors Service retained India's growth forecast at 7.5% for 2016 and stated that the outlook for emerging markets economies stabilized on account of the modest recovery in commodity prices, better capital flows and a better near-term outlook for growth in China. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 162.17 crore on August 18, 2016. Meanwhile, good buying was observed in selected metal stocks as India has slapped anti-dumping duty on certain cold-rolled flat steel products from four nations including China and South Korea to guard domestic industry from cheap imports. Oil producing majors also gained some traction after Brent crude topped $50 for the first time in six weeks as major producers prepared to discuss a possible output freeze. Further, many stock specific actions popup during the session like Coal India came under pressure after the reports that the government's proposed 5-10% stake-sale in the company and is likely to happen in Q4 of FY17. On the global front, Most Asian markets drifted lower on Friday, however, Japanese markets closed modestly higher. Back home, the local benchmark got off to a soft start as the indices showed signs of consolidation in early trade, amid weak Asian cues. Thereafter, the frontline indices oscillated in an extremely tight range through the morning session as market participants remained sideways in the absence of any significant trigger at domestic front. Finally, the BSE Sensex slumped by 46.44 points or 0.17% to 28077.00, while the CNX Nifty dropped 6.35 points or 0.07% to 8,666.90.

The US markets closed lower on Friday, as investors worried about whether the Federal Reserve will raise interest rates sooner rather than later. A rise in bond yields and a fall in gold may signal that bond investors are betting that the Fed might return to tightening monetary policy. Friday's moves followed comments from San Francisco Fed President John Williams, who stated that he would like to see another rate increase sooner rather than later, suggesting he is in the camp of central-bank officials who would like a rate increase as soon as September. On the economy front, the moderate but steady pace of expansion should continue for the rest of the year, according to an analysis of indicators that typically correlate with the future health of the economy. The Conference Board stated that its leading economic index rose 0.4% in July. The index, which consists of ten indicators from stock prices to jobless claims to hours worked in manufacturing, rose for a second month. Eight of the ten indicators rose, with the hours worked giving the biggest jolt to the index. Over the last six months, the index has grown at a pace equivalent to a 2.1% annual rate. The only negative contributor in July was average consumer expectations for business conditions. The Dow Jones Industrial Average lost 45.13 points or 0.24 percent to 18,552.57, Nasdaq was down 1.77 points or 0.03 percent to 5,238.38, while S&P 500 dropped 3.15 points or 0.14 percent to 2,183.87.

Crude oil futures consolidated on Friday, though Nymex crude remained near seven-week highs following a choppy, volatile session. Though, traders' energy traders largely shrugged off a considerable increase in US oil rigs last week. Oil services firm Baker Hughes said that the US weekly oil rig count rose by 10 to 406 last week. The number of oil rigs nationwide has increased in each of the last eight. Benchmark crude oil futures for September delivery gained $0.23 or 0.48 percent to close at $48.45 a barrel after trading in a range of $47.94 and $48.74 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for October delivery declined by $0.05 or 0.10 percent to $50.82 a barrel on the ICE.

Indian rupee depreciated substantially against dollar on Friday as investors remained cautious on the expectation that the Reserve Bank of India (RBI) may delay cutting interest rates after recent higher inflation data.  Some losses in the domestic equity market and anxiety ahead of the announcement of a new governor for the RBI expected anytime now, have also contributed to rupee's fall. On the global front, dollar strengthened against other major currencies after hawkish comments from New York Fed President William Dudley and San Francisco Fed President John Williams over US interest-rate increases.  Finally the rupee ended at 67.06, weaker by 25 paise from its previous close of 66.81 on Thursday.

The FIIs as per Friday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 4285.83 crore against gross sell of Rs 4030.54 crore, while in the debt segment, the gross purchase was of Rs 1297.70 crore with gross sales of Rs 913.73 crore.

The US markets turned lower in last session despite positive economic data as the traders remained concerned about the timing of interest rate hike by Federal Reserve. The Asian markets have made a mixed start, with some indices trading marginally in red, as hawkish comments from a Federal Reserve official boosted the likelihood of a US interest-rate increase this year. The Indian markets declined in last session, paring some gains of previous trading, today the  start of the F&O expiry week is likely to be cautious but in green on mixed regional cues, but as the trade progress traders will be getting some encouragement with the appointment of Urjit Patel, a known inflation warrior, as Raghuram Rajan's successor at the Reserve Bank of India. Patel's appointment is also an indirect acknowledgment of Raghuram Rajan's work and legacy. The government is confident that Urjit Patel, will be "more balanced" in his approach to managing inflation and will be mindful of the need to push growth, considered critical for creating jobs. Global rating agency Moody's too has said that clean-up of India's banks is good for India's credit rating and it expects the process to continue under governor-designate Urjit Patel. Meanwhile, marketmen will also be getting some support with Francis Gurry, director-general at the World Intellectual Property Organization stating that India can break into the top-25 rank in the next 10 years. Also, Union Labour Minister Bandaru Dattatreya has said that EPFO will raise proportion of its investments in exchange traded funds (ETFs) from the present 5 per cent and a final decision on the quantum for current fiscal would be taken very soon. Some boost can also come with report that foreign investors have deployed over Rs 7,700 crore in the Indian stock market so far this month, driven by global and domestic factors. There will be some buzz in the aviation sector, on report that domestic air passenger traffic jumped by nearly 26 percent in July, registering double-digit growth for the 24th consecutive month with lower fares attracting more fliers. Local airlines flew 85.08 lakh passengers in July compared to 67.62 lakh fliers recorded in the year-ago period.

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  • Wipro has picked up a minority stake in Israeli cyber-security startup Intsights Cyber Intelligence for $1.5 million, months after the Bangalore-based firm invested in Israeli venture capital firm TLV Ventures.
  • Tata Motors, the country's largest automaker by revenues, has delivered 241 buses to the Karnataka State Road Transport Corporation, under the Jawaharlal Nehru National Urban Renewal Mission.
  • ICICI Bank, India's largest private sector bank, has unveiled Asia's first payment service using a smartphone keyboard.
  • HDFC Bank is planning to set up a 200 seater business process outsourcing centre in Bhubaneswar.
  • The Centre government has imposed an additional penalty of $380 million on Reliance Industries and its partners for producing less than targeted natural gas from eastern offshore KG-D6 fields for 2014-15.

News Analysis