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Market Commentary 23 January 2017
Markets to make a soft start of the holiday truncated week


Friday's session turned out to be an awful day of trade for Indian equity markets where frontline indices tumbled below their crucial 27,100 (Sensex) and 8,350 (Nifty) levels. After getting a negative start, market never looked confident throughout the session and ended near the intraday low levels, as sentiments remained dismal ahead of inauguration speech of Donald Trump as US President. For most of his campaign and after the election, Trump vowed to make sweeping changes to US trade and immigration policy, threatened to impose steep tariffs on Chinese imports and proposed hefty tax cuts. On the domestic front, sentiments were undermined by the report that India's economy lost momentum in the final three months of 2016 after Prime Minister Narendra Modi's ban on high-value notes hurt consumption and businesses. Having posted growth of above 7% for six consecutive quarters, India's gross domestic product is expected to have expanded just 6.5% in the October-December quarter - the weakest in nearly three years. Besides, discouraging earnings by some blue-chip companies too weighed on sentiments. Adani Power reported a net loss of Rs 478.39 crore for the quarter ended December 31, 2016 (Q3FY17) as compared to net loss of Rs 30.24 crore for the same quarter in the previous year. MindTree reported 26% Y-o-Y drop in its consolidated net profit at Rs 103 crore due to poor performance of its US and Europe subsidiaries. Meanwhile, IT stocks came under selling pressure on the report that two powerful US Senators announced they will introduce a legislation, which if passed by the Congress, would give preference to foreigners studying in American universities, a move that will tighten the noose around the H-1B visa programme and could hurt Indian IT firms. Furthermore, several Cement stocks edged lower after the Competition Commission of India (CCI) imposed penalties aggregating to almost Rs 207 crore on seven major cement companies for rigging of bids and cartelisation to get tenders in Haryana government orders. Finally, the BSE Sensex declined by 274.10 points or 1% to 27034.50, while the CNX Nifty dropped 85.75 points or 1.02% to 8,349.35.


The US markets closed higher on Friday, starting the Donald Trump presidency in the green, but the Dow & S&P 500 logged their second straight weekly decline as uncertainty about the new administration has lingered. Equities ended off their highs of the session after Trump took the oath of office to become the nation's 45th president and delivered an inaugural address that echoed the protectionist comments he had made throughout his campaign. While he called for measures to support American workers, he offered few additional details that could provide clarity to investors about his legislative priorities. Investors bet that he would pursue massive corporate tax cuts, deregulation, and infrastructure spending, all of which are expected to accelerate economic growth and stoke inflation. Meanwhile, Philadelphia Federal Reserve President Patrick Harker said he expects three interest rate increases in 2017 if the labor market improves further and inflation moves to the Federal Reserve's 2 percent goal. Harker added that consumer confidence is strong, retail sales are still solid - though slightly slower than previously anticipated - and equity markets are up. The Dow Jones Industrial Average added 94.85 points or 0.48 percent to 19,827.25, the Nasdaq gained 15.25 points or 0.28 percent to 5,555.33, while S&P 500 was up by 7.62 points or 0.34 percent to 2,271.31.


Crude oil futures rallied on Friday and managed a modest weekly gain, supported by good fourth quarter GDP growth from China, which came in at 6.8% compared with a forecast of 6.7%, boosting expectations of healthy demand for oil. Also, there were hopes that US and Canadian production may prevent OPEC quotas from ending a global supply glut that forced oil below $30 in 2015. There were further signs that U.S. production will skyrocket after the oil services firm Baker Hughes reported that US energy companies this week added the most oil rigs since 2013. The number of active US rigs drilling for oil jumped higher by 29 to 551 rigs for the week. Benchmark crude oil futures for February delivery moved up by $1.05 or 2.04 percent to $52.42 on the New York Mercantile Exchange. In London, Brent crude for March delivery ended higher by 2.46 percent at $55.49 on the ICE.


Indian rupee extended its weakness on Friday for the third consecutive day amid persistent foreign capital outflows. Sentiments remained down-beat with the report indicating that India's economy lost momentum in the final three months of 2016 after Prime Minister Narendra Modi's ban on high-value notes hurt consumption and businesses. Having posted growth of above 7% for six consecutive quarters, India's gross domestic product is expected to have expanded just 6.5% in the October-December quarter - the weakest in nearly three years. Traders remained cautious ahead of inauguration speech of Donald Trump as US president later in the day. However, dollar weakness against other currencies overseas after Fed Chair Janet Yellen indicated the central bank would take a wait-and-see approach to monetary policy, suggesting any rate hikes this year could be slow, supported the rupee. Finally, the rupee ended at 68.18, 6 paise weaker from its previous close of 68.12 on Thursday.


The FIIs as per Friday'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 4326.37 crore against gross selling of Rs 3852.75 crore, while in the debt segment, the gross purchase was of Rs 614.16 crore with gross sales of Rs 844.23 crore.


The US markets ended modestly higher in last session, with the Dow snapping its five days losing streak and traders seemed focused on President Donald Trump's inaugural address after he was officially sworn in as the 45th president. The Asian markets have made a mixed start with some indices led by the Japanese market in red as the dollar declined against yen after Donald Trump in his first days in office offered little news on his plans to boost growth. The Indian markets slumped in last session, losing the momentum completely in the latter half of the trade. Today, the start of the crucial F&O expiry and holiday shortened week is likely to be soft to cautious, with IT and pharma stocks likely to be in focus, after Donald Trump took a protectionist tone in his first speech as U.S. President. Marketmen will also be concerned with a major central revenue body asking Finance Minister Arun Jaitley not to implement Goods and Services Tax (GST) in a hurry and threatened to take legal recourse in case their concerns are not addressed, claiming that demonetisation has affected country's growth. However, there will be some support with the BRICS nation's National Development Bank chief K V Kamath's statement that India will continue to grow on the back of its consumption-driven economy. He also said that the demonetisation move in India would have only a 'short-term blip' after which India should be back on a clear growth path. Meanwhile, the Union Minister of State for Labour and Employment, Bandaru Dattatreya has said that the government has set a target to create employment opportunities to one crore youth by 2020 through a skill development scheme under the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). There will be buzz from the primary market too with BSE, Asia's oldest stock exchange launching its IPO in a price band of Rs 805-806 starting today. There will be lots of important earnings announcements too, to keep the markets buzzing.


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  • Larsen & Toubro's wholly owned subsidiary L&T Hydrocarbon Engineering has bagged orders worth Rs 1700 crore in its Construction Services business vertical.
  • Mahindra & Mahindra has acquired Turkish farm equipment company Hisarlar for Rs 127 crore.
  • Bharti Airtel is considering mergers or stake sales at some of its Africa operations as it looks to cut debt and make its biggest overseas acquisition profitable.
  • Bank of Baroda has signed an agreement with Kwality for providing Rs 4,000 crore loans to the former's one lakh farmers from whom the company procures milk.
  • Bosch has inaugurated first Company Owned Company Operated Bosch Car Service Centre in Bengaluru.



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