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NSE Intra-day chart (21 December 2018)
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Market Commentary 24 December 2018
Markets to get a cautious start amid weak global cues


Indian equity benchmarks witnessed bloodbath on Friday with frontline gauges ending below their crucial 35,800 (Sensex) and 10,800 (Nifty) levels on global growth concern. Markets started the session on cautious note, as traders remained pessimistic with the central bank's statement that the total external commercial borrowings (ECB) will now be rule-based and will be capped at 6.5% of the gross domestic product. The limit now works out to be about $160 billion for the current fiscal year, against the actual outstanding of $126.29 billion as on September 30. The central bank already has a rule-based exposure for foreign investors' exposure in bonds. Foreigners are allowed to invest up to 6% of the outstanding debt. Sentiments on the street weakened further with Parliamentary Committee expressing concern over the huge losses suffered by some Central Public Sector Undertakings (CPSUs) and the low rate of return on assets and pressed the urgent need for optimum utilisation of their assets to generate better earnings. Markets extended southward journey to end near intraday lows, as traders shrugged off report that the Lok Sabha passed the Consumer Protection Bill, and the government introduced a Bill to amend the Companies Act to further improve the ease of doing business and ensure better compliance levels. The Consumer Protection Bill seeks to strengthen the rights of consumers and provide a mechanism for redressing complaints regarding defects in goods and deficiency in services. Meanwhile, International Institute of Sustainable Development (IISD) stated that India's total energy subsidies amounted to Rs 1,51,480 crore in financial year 2017, a 36 per cent decrease since FY14. India's fossil-fuel subsidies fell sharply by nearly 70 per cent, from Rs 1,73,330 crore in FY14 to Rs 52,980 crore in FY17. Finally, the BSE Sensex plunged by 689.60 points or 1.89% to 35,742.07, while the CNX Nifty was down by 197.70 points or 1.81% to 10754.00.


The US markets end lower on Friday, sending the Dow Jones Industrial Average to its worst week since the financial crisis in 2008, down nearly 7 percent. The Nasdaq Composite Index closed in a bear market and the S&P 500 was on the brink of one itself, down nearly 18 percent from its record earlier this year. Sentiments were down-beat as traders kept an eye on developments on Capitol Hill, with a shutdown of several key government agencies just hours away. Ahead of a midnight deadline, lawmakers appear to be at an impasse over funding for President Donald Trump's controversial wall on the border with Mexico. The currently Republican-controlled House voted 217 to 185 in favor of a short-term spending bill, although the bill includes more than $5 billion for the construction of the wall opposed by Democrats. House Republicans took up the bill, which also provides $7.8 billion for disaster relief, after Trump said he would not sign a stopgap spending approved the Senate that did not include wall funding. On the economic front, reflecting downward revisions to consumer spending and exports, the Commerce Department released a report showing slightly slower than previously estimated US economic growth in the third quarter. The report said real gross domestic product surged up by 3.4 percent in the third quarter compared to the previously estimated 3.5 percent jump. The pace of GDP growth had been expected to be unrevised. The increase in consumer spending, which accounts for about 70 percent of the economy, was downwardly revised slightly to 3.5 percent from 3.6 percent. Dow Jones Industrial Average plunged 414.23 points or 1.81 percent to 22445.37, Nasdaq dropped 195.41 points or 2.99 percent to 6333.00 and S&P 500 was down by 50.80 points or 2.06 percent to 2416.62.


Crude oil futures ended lower on Friday, down more than 11% for the week, as a rise in active US oil rigs exacerbated concerns tied to growing global crude production and a slowdown in energy demand. Meanwhile, the number of active US rigs drilling for oil, a key metric of activity in the sector that offers a hint on future output, rose by 10 to 883 this week. That was the biggest weekly rise since the week ended November 9 and it followed two straight weeks of declines. A slowdown in global growth could lead to weaker energy demand and that, along with continued growth in US crude production, feeds worries about a worldwide glut of supplies. Benchmark crude oil futures for February declined 29 cents or 0.6 percent to settle $45.59 a barrel on the New York Mercantile Exchange. February Brent crude lost 53 cents or 1 percent to settle at $53.82 a barrel on London's Intercontinental Exchange.


Snapping its four-day winning streak, Indian rupee ended considerably weaker against dollar on Friday as demand for the American unit from importers and banks picked up. Sentiments turned pessimistic with the central bank's statement that the total external commercial borrowings (ECB) will now be rule-based and will be capped at 6.5% of the gross domestic product. The limit now works out to be about $160 billion for the current fiscal year, against the actual outstanding of $126.29 billion as on September 30. The central bank already has a rule-based exposure for foreign investors' exposure in bonds. Foreigners are allowed to invest up to 6% of the outstanding debt. Besides, a sharp sell-off in the domestic stock market put pressure on the rupee. On the global front, dollar hovered near a one-month low against its peers on Friday, weighed down by a subdued outlook towards US interest rates and the economy, while risk aversion in the broader markets boosted the yen. Finally, the rupee ended at 70.18, 48 paise weaker from its previous close of 69.70 on Thursday.


The FIIs as per Friday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 4017.59 crore against gross selling of Rs 4647.55 crore, while in the debt segment, the gross purchase was of Rs 2673.06 crore with gross sales of Rs 1913.83 crore. Besides, in the hybrid segment, the gross selling was of Rs 0.44 crore against no buying.


Extending their previous session losses, the US markets settled sharply lower on Friday as investors remained gripped by fears of a partial government shutdown, rising interest rates and flagging global growth and uncertainty surrounding US-China trade relations. Asian markets have made a weak start and are trading in red in early deals on Monday, as investors fretted that political instability in the United States was leaving the country rudderless at a time when the global economy was showing signs of faltering. Indian Equity markets ended in red with a cut of around two percent on Friday tracking a selloff in global markets. Domestic shares tracked broader Asian markets as the possibility of a US government shutdown and further rate hikes by the Federal Reserve next year made investors jittery. Today, the start is likely to be cautious on sluggish global cues. Traders may remain concern on report that Finance Commission Chairman N.K. Singh has sounded a note of caution against fiscal slippage, saying it would adversely impact the country's macroeconomic stability as well as investment climate. He expressed apprehension that some states are not according priority to fiscal discipline, which was not the case earlier. Meanwhile,  the Reserve Bank of India's (RBI) data has showed the country's foreign exchange reserves declined by $613.9 million to $393.12 billion in the week to December 14, due to fall in foreign currency assets. In the reporting week, foreign currency assets, a major component of the overall reserves, dropped by $631.6 million to $367.865 billion. However, traders will be getting some encouragement in later part of trade with Finance minister Arun Jaitley expressing confidence of meeting the fiscal deficit target of 3.3 % of GDP for the current financial year (FY19) despite revenue loss on account of reduction in GST rates. The GST Council in its 31st meeting has decided to cut rates on 23 commonly used goods and services. There will be also some support with Ficci's President Sandip Somany stating that a gradual reduction in GST rates would further stabilise and strengthen the tax regime. Traders may take note of a report, in a bid to promote cleaner fuel and cut down on the huge crude oil import bills, Union Minister Nitin Gadkari has said that India endeavours to take the Rs 110 billion methanol economy to about Rs 2 trillion in five years. Sugar sector stocks may see some action on report that the government is considering an additional soft loan of Rs 7,400 crore to sugar mills for creating ethanol capacity under a recently launched scheme. There will be some buzz in the solar stocks as the GST council issued clarity on the confusion over the rates for solar power projects. It clarified that 70% of the gross value of project shall be deemed as the value of supply of said goods attracting 5% rate. Aviation stocks will keep buzzing on report that India's domestic air passenger traffic grew by 11.03 per cent to 11.64 million in November 2018. Passenger traffic during the January-November 2018 period grew by 19.21 per cent.  Also, the logistics stocks may keep buzzing on report that in a bid to cut India's massive logistics costs, the commerce department is arming itself with a national digital tool to map logistics bottlenecks, freight movements and even toll congestions, along with a logistics portal where businesses can procure and sell services.


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