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NSE Intra-day chart (21 September 2016)
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Market Commentary 22 September 2016
Markets to get a gap-up start on jubilant global cues


Indian stock markets showed a volte-face on Wednesday, as what started on a promising note ended as a dismal show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted to the negative territory, through ended on a flat note. The start was promising and the trade remained firm till noon as markets across the region gained after the Bank of Japan decided to adopt a target for long-term interest rates in an overhaul of its massive stimulus programme. But the indices lost their nerve and catapulted in afternoon trade as cautious investors booked profits ahead of the US Federal Reserve interest rate decision which is due later in the day. On the domestic front, sentiments remained subdued on the report that foreign portfolio investors (FPIs) sold shares worth a net Rs 1147 crore on September 20, 2016. Furthermore, the Foreign Institutional Investors (FIIs) remained net seller of Rs 2031.81 crore in index futures and options (F&O) segments in the last session. Weakness in rupee against the dollar also weighed on the sentiment. Indian rupee depreciated by 4 paise to trade at 67.06 against the US dollar at the time of equity markets closing, due to fresh buying of the American currency by banks and importers. However, investors got some comfort with economic affairs secretary Shaktikanta Das' statement that the finance ministry has promised to look into some taxation issues raised by foreign investors, some of which may be addressed in the budget next year. Meanwhile, Railway stocks edged higher after the Cabinet approved merging Railway Budget with the general Budget and doing away with distinction of plan and non-plan expenditure. Good buying was also seen in stocks related to infra sector as the government announced the names of 27 more cities that will be developed under the centre's ‘Smart City Mission'. Markets after getting a cautious start, the local benchmarks showed some strength in morning trades, but the sentiments turned pessimistic in afternoon trades and indices started drifting lower, as investors turned cautious ahead of US Federal Reserve meet to decide on the world's largest economy's monetary policy, the key indices thereafter failed to show any kind of fervor. Finally, the BSE Sensex declined by 7.79 points or 0.03% to 28515.41, while the CNX Nifty gained 1.25 points or 0.01% to 8,777.15. 


The US markets closed higher on Wednesday, after the Federal Reserve opted to keep interest rates unchanged as it sought further evidence of economic strength. The decision to keep rates unchanged was widely expected. But the Fed's tone reflects the recent softening of economic data and is generally positive for risky assets such as equities. The policy-setting Federal Open Market Committee, in a 7-to-3 vote, opted to keep rates steady in what Chairwoman Janet Yellen described as a new normal as central banks elsewhere around the globe embark upon quantitative-easing measures. The Fed's dot plot, a scorecard of top officials' interest-rate predictions, reflected that hawkish bent, 14 of the 17 Fed officials saw a rate increase by year-end. The Fed also projected a less aggressive rise in interest rates next year and in 2018, and cut its longer-run interest rate forecast to 2.9 percent from 3.0 percent. The Dow Jones Industrial Average added 163.74 points or 0.90 percent to 18,293.70, Nasdaq gained 53.83 points or 1.03 percent to 5,295.18, while S&P 500 was up 23.36 points or 1.09 percent to 2,163.12. 


Crude oil futures surged on Wednesday, reacting to an unexpected draw in U.S. crude stocks and an oil service worker strike in Norway. The U.S. Energy Information Administration (EIA) reported a 6.2 million barrel decline in weekly crude inventories. Total U.S. crude oil inventories stood at 504,6 million barrels as of last week, which the EIA considered to be historically high levels for this time of year. Benchmark crude oil futures for October delivery gained $1.29 or 2.9 percent to close at $45.34 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for November delivery was up by $0.92 or 2.03 percent to $46.93 a barrel on the ICE.


Indian rupee ended unchanged compared to its previous close as investors remained cautious ahead of policy decision of US Federal Reserve which is widely anticipated that Fed will leave the price of money unchanged for ninth-straight month. Dollar strengthened against other currencies overseas also dampened the rupee sentiment. However, domestic currency got some support from global rating agency Moody's statement that it could upgrade India's rating in 1-2 years if it is convinced that reforms are 'tangible', though it has called the reform process slow and gradual with muted private investment and NPAs posing a challenge. It said that it has a positive outlook on India. On the global front, yen weakened against dollar after the Bank of Japan decided to adopt a target for long-term interest rates in an overhaul of its massive monetary stimulus programme. Finally, the rupee ended unchanged from its previous close of 67.02 on Tuesday.


The FIIs as per Wednesday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 4551.11 crore against gross sell of Rs 3445.40 crore, while in the debt segment, the gross purchase was of Rs 1280.64 crore with gross sales of Rs 1214.76 crore.


The US markets rallied in the last session, with the tech-heavy Nasdaq surging to a new record closing high, after the Fed left interest rates unchanged as expected but signaled that a rate hike is likely before the end of the year. The Asian markets have made a green start reacting to the Fed's decision. Loose monetary policies in the U.S., Europe and Asia have helped power gains in stocks across the globe. The Indian markets turned cautious in the final hours of the last session ahead of the Fed's policy decision and the major averages pared all their gains to make a flat close. Today, the start is likely to be a gap-up one tailing the jubilation in the global markets, after central banks including the Federal Reserve signaled monetary policies will remain accommodative. Traders will also be getting some support with the report that country's current account deficit (CAD) narrowed to $ 0.3 billion, or 0.1 percent of GDP, in the first quarter of 2016-17, significantly lower than $ 6.1 billion or 1.2 percent of GDP in Q1 of 2015-16.on account of lower trade gap. Also, the GST Council, which will decide on tax rates, exempted goods and threshold, will meet for the first time today as it races against time to iron out issues between Centre and states for rolling out the new indirect tax regime from April 1, 2017. More support can come with a private report stating that rural demand is likely to turn up in the coming months largely driven by better rains, and Kharif farm income is expected to jump 12.3 percent this year. Meanwhile, in a major overhaul, the Cabinet has approved advancing presentation of the annual Budget by a month, scrapping over nine-decade old tradition of having a separate Railway Budget and removing classifications for expenditure to make the exercise simpler. Export and logistics stocks will be in action on reports that Commerce Ministry is working on a proposal to enhance the logistics competitiveness of exporters and is discussing it with the railways as well as port authorities.


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