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NSE Intra-day chart (21 December 2016)
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Market Commentary 22 December 2016
Markets to continue the somber run on soft global cues


Indian benchmarks indices extended the sorrow of closing in the red territory for the fifth consecutive session on Tuesday as investors shied away from taking any big bets on rising geopolitical concerns in Turkey, Germany and Switzerland. Sentiments took a hit after Global financial services major Nomura revised upwards India's current account deficit (CAD) forecast to 1.4% of GDP for the current fiscal from 0.4% earlier. According to Nomura, India's trade deficit widened to a 16-month high of $13 billion in November from $10.4 billion in October, as a result of a sharp slowdown in exports after demonetization and a pickup in imports, led by gold and higher commodity prices. For the fourth quarter (October-December) of 2016 Nomura expects a current account deficit of 2.5% of GDP (versus 0.9% earlier) and for the January-March period, it is likely to be around 2% of GDP. Trading sentiments weakened further on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 535.77 crore on December 19, 2016. The downside remained capped with Finance Minister Arun Jaitley's statement that Reserve Bank of India was fully prepared to deal with currency shortages post demonetisation and has enough currency in its chests to last 'far beyond' December 30, 2016. Some support also came with NITI Aayog member Ramesh Chand's statement that despite the impact of demonetisation, growth in agriculture for the current year will still be 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, Aviation stocks came under pressure after the report that India's Airlines industry may have to bear an additional tax burden of up to Rs 15,000 crore annually once the Goods and Services Tax (GST) is implemented. The additional tax burden may push airlines, most of which have turned profitable, into losses again, coming as it does at a time when global fuel prices are flaring up. Finally, the BSE Sensex declined by 66.72 points or 0.25% to 26307, while the CNX Nifty dropped 21.95 points or 0.27% to 8,082.40.


The US markets closed lower on Wednesday, with the Dow industrials and Nasdaq Composite retreating from all-time highs set a day earlier. The market traded in a relatively tight range amid thinning volumes ahead of the December holidays. Wall Street has been in rally mode since the US presidential election on November 8, with investors wagering that the pro-business policies of President-elect Donald Trump will spur faster economic growth. The recent market gains have fueled a rotation from bonds and into stocks, with inflows into equity funds since the election reaching $63 billion last week. On the economy front, sales of previously-owned homes rose modestly in November as lean inventory and higher prices continue to choke the housing market. Existing-home sales ran at a seasonally adjusted annual 5.61 million pace. That was up 0.7% from a downwardly-revised pace of 5.57 million in October and marks the highest since February 2007. November's rate was 15.4% higher compared to a year ago, the first month when new regulations, known as the 'Know Before You Owe' disclosures, went into effect, snarling closing times. The Dow Jones Industrial Average lost 32.66 points or 0.16 percent to 19,941.96, Nasdaq was down 12.51 points or 0.23 percent to 5,471.43, while S&P 500 dropped 5.58 points or 0.25 percent to 2,265.18.


Crude oil futures declined on Wednesday after the Energy Information Administration (EIA) data showed an unexpected build in US oil inventories. Crude inventories rose by 2.3 million barrels in the week to Dec. 16, compared with expectations for a decrease of 2.5 million barrels. The Energy Department said that this was the first increase in the stockpile in nearly six weeks. The report also showed that gasoline inventories declined by 1.3 million barrels, while distillate inventories including diesel, reported a drop of 2.4 million barrels. Benchmark crude oil futures for January delivery declined by $0.81 or 1.5 percent to $52.49 on the New York Mercantile Exchange. In London, Brent crude for February delivery ended lower by $ 0.81 or 1.48 percent at $54.54 on the ICE.


Recovering from a two-day fall, Indian rupee ended stronger on Wednesday, due to increased selling of the American currency by exporters and banks. The domestic currency looked strong from the very beginning but losses in the equity market capped some rupee gains. Investors remained cautious over CRISIL's report that the government's demonetising Rs 500 and Rs 1,000 notes may yield lasting economic benefits but its immediate impact has been stunningly disruptive, with cash shortages roiling business plans. The report highlighted that the long-term aim of India's demonetisation policy is to improve economic and public administrative conditions by forcing black markets and cash-based sectors of the economy to operate in the formal economy. On the global front, pound drifted lower against its major counterparts on growing concerns over Brexit, after the UK Prime Minister Theresa May denied a Parliamentary vote on the final Brexit deal agreed with the EU. Finally, the rupee ended at 67.91, 14 paise stronger from its previous close of 68.05 on Tuesday.


The FIIs as per Wednesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3288.88 crore against gross sell of Rs 3910.25 crore, while in the debt segment, the gross purchase was of Rs 144.26 crore with gross sales of Rs 1090.13 crore.


The US markets witnessed some profit taking at the record highs and declined in last session, though the selling pressure remained relatively subdued, limiting the downside for the markets, also the National Association of Realtors reported an unexpected increase in existing home sales in the month of November. The Asian markets have made mostly a lower start tailing the US markets, despite the oil prices firming up after falling Wednesday for the first time in a week. The Indian markets continued the slide for the sixth straight session last day. Today, the start is likely to remain muted on mostly a weak global trend, traders will be concerned with Prime Minister Narendra Modi's top economic adviser Bibek Debroy's statement that the negative shock from demonetisation will last until the end of March, though he also said that improved growth next year should fully compensate for the loss. Also, the minutes of last rate-setting meeting of the Reserve Bank of India's monetary policy committee (MPC) showed that it shifted its focus towards inflation while playing down concern about economic growth. The minutes showed that all members expressed concern over rising risk from global oil prices, and domestic non-oil and non-food inflation. RBI Governor Urjit Patel voted for status quo on the key interest rate arguing that the central bank needs to remain focused on inflation target as the impact of demonetisation on economy is uncertain, though transitory. Market may however get some support in the latter trade on report that the agriculture sector is all set to bounce back leaving two years of drought behind and may well pull off record foodgrain output of 270 million tonnes in 2016-17 on good rains. There will be some buzz in the power sector stocks, as the government has allowed public and private power producers to swap their coal supplies with a view to reducing the cost of electricity by ensuring more efficient fuel usage.



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  • Bharti Airtel's subsidiary - Network i2i has entered into a definitive agreement with Orascom to acquire Middle East North Africa Submarine Cable System.
  • Sun Pharmaceutical Industries has completed the acquisition of 85.1% stake in Russia-based JSC Biosintez.
  • State Bank of India has received shareholders' approval to raise up to Rs 5,681 crore through preferential issue of equity shares to the government of India.
  • Bajaj Auto will hike prices of bikes by up to Rs 1,500 from January in order to partially offset the impact of rising input costs and upgrading of its entire portfolio to BS-IV emission levels.
  • HDFC Bank has signed an MoU with Bihar State Power Holding Company to enable residents pay electricity bill online.


News Analysis