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NSE Intra-day chart (22 March 2019)
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Market Commentary 25 March 2019
Markets to make a gap-down opening tailing weak global cues


Equity benchmarks saw sluggish trading session on Friday, with Sensex and Nifty closing lower by over half a percent each. The start of the day was positive, aided by the International Monetary Fund's (IMF) statement that the country has been one of the fastest growing large economies in the world, with growth averaging about 7% over the past five years. IMF said important reforms have been implemented and it feel that more reforms are needed to sustain this high growth, including to harness the demographic dividend opportunity, which India has. Some support also came with report that Finance Minister Arun Jaitley has made a case for setting up GST Council-like federal institutions to promote healthcare, rural development and agriculture sectors by optimally utilising resources of the centre and states. He said agriculture, rural development and healthcare is one area where the central government spends a lot of money on supporting farmers, creating infrastructure and building health centres for poor population. But, bourses failed to hold gaining momentum and turned negative in noon deals, as Fitch Ratings in its Global Economic Outlook lowered India's Gross domestic product (GDP) growth forecast to 6.8% for fiscal year 2020  from 7% estimated earlier, on the back of weaker than expected momentum in the economy. Some anxiety also came in with a report that India expressed concern over the widening trade deficit with China which has ballooned to over $58 billion, with the country's new envoy saying that addressing the issue would be his top priority. Sentiments also remained downbeat with a private report that the liquidity crisis in the non-banking finance companies (NBFC) space triggered by the default of infrastructure ending major IL&FS last September is continuing to have an impact on mutual fund (MF) deployments in the sector. The overall exposure of debt MFs to NBFCs stood at Rs 2.2 lakh crore in February, a drop of Rs 45,386 crore since July 2018 when the liquidity stress first emerged. Finally, the BSE Sensex lost 222.14 points or 0.58% to 38,164.61, while the CNX Nifty was down by 64.15 points or 0.56% to 11,456.90.


The US markets ended lower on Friday on account of profit booking after yesterday's strong upward move.  Lingering uncertainty about trade talks between the US and China weighed on the markets ahead of another round of high-level negotiations next week. Beside, traders also continued to digest the Federal Reserve's dovish monetary policy announcement earlier in the week. The Fed's decision to move away from plans to continue raising interest rates this year has been described by some participants as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings. The central bank has also been accused of bending to pressure from President Donald Trump, who has claimed US economic growth would be even stronger if the Fed had not raised rates last year. Adding to the concerns about the outlook for the economy, the yield on the benchmark ten-year note fell below the yield on the three-month bond, which is seen by many as a reliable harbinger of a recession. On the economic front, wholesale inventories in the US increased by much more than anticipated in the month of January, according to a report released by the Commerce Department. The report said wholesale inventories surged up by 1.2 percent in January after jumping by 1.1 percent in December. The bigger than expected increase in wholesale inventories was partly due to a 1.6 percent spike in inventories of non-durable goods, which followed a 0.1 percent uptick in December. The Commerce Department said inventories of durable goods also climbed by 0.9 percent in January after surging up by 1.7 percent in December. Meanwhile, after reporting existing home sales at their lowest level in over three years in the previous month, the National Association of Realtors (NAR) released a report showing a substantial rebound in existing home sales in the month of February. Dow Jones Industrial Average plunged 460.19 points or 1.77 percent to 25502.32, S&P 500 declined 54.17 points or 1.90 percent to 2800.71 and Nasdaq was down by 196.29 points or 2.50 percent to 7642.67.


Crude oil futures ended lower on Friday on concerns about global energy demand. However, US prices managed to tally a gain for the week, their third in a row, as OPEC output cuts and US sanctions on Venezuela and Iran look to further tighten supplies. Meanwhile, it is also possible that less crude oil and oil products will reach the world market from Russia in the near future. The Russian government decided that companies will have to sell a certain amount of gasoline and diesel on the domestic market in order to obtain an export permit. This is intended to prevent domestic fuel prices rising too sharply as a result of higher crude oil prices. Benchmark crude oil futures for May declined 94 cents or 1.6 percent to settle at $59.04 a barrel on the New York Mercantile Exchange. May Brent crude dropped 83 cents or 1.2 percent to settle at $67.03 a barrel on London's Intercontinental Exchange.


Erasing all of the initial gains, Indian rupee ended weaker against dollar on Friday, on emergence of demand for the greenback from importers. Traders turned cautious as Fitch Ratings in its Global Economic Outlook lowered India's Gross domestic product (GDP) growth forecast to 6.8% for fiscal year 2020  from 7% estimated earlier, on the back of weaker than expected momentum in the economy. Anxiety also persisted with a report that India expressed concern over the widening trade deficit with China which has ballooned to over $58 billion, with the country's new envoy saying that addressing the issue would be his top priority. Losses in domestic equity markets too weighed on the domestic unit. On the global front, dollar dropped on Friday, giving up some of its overnight gains and on track for a second consecutive weekly dip thanks to renewed downward pressure on government bond yields. Finally, the rupee ended at 68.95, 12 paise weaker from its previous close of 68.83 on Wednesday.


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 7433.57 crore against gross selling of Rs 6082.62 crore, while in the debt segment, the gross purchase was of Rs 3572.33 crore with gross sales of Rs 1790.72 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.65 crore against gross selling of Rs 0.25 crore.


The US markets ended sharply lower on Friday after a US recession indicator blinked red and a report on German manufacturing raised concerns about Europe's most important economy. Asian markets are trading in red on Monday as investors fled to the safety of bonds as on growing worries about an impending US recession, sending global yields plunging. Indian markets ended Friday's trading session in red territory as investors booked profits from recent gains. Today, the markets are likely to make a gap-down opening of the F&O series expiry week tailing the weak global cues amid growing concerns about an impending US recession. There will be some cautiousness on the domestic front ahead of the fiscal deficit and infrastructure output data for the month of February are slated for a release later in the week. However, some support may come later in the day with the Reserve Bank of India (RBI) report showing that India's foreign exchange reserves surged by a whopping $3.602 billion to $405.638 billion in the week to March 15, driven by rise in foreign currency assets. Traders may also reacting to the Employees' Provident Fund Organisation (EPFO) data showed that net employment generation in the formal sector touched a 17-month high of 8.96 lakh in January. The addition in January was 131% higher as compared with 3.87 lakh EPFO subscribers added in the year-ago month. Meanwhile, the Government said it has exceeded its disinvestment target for the current fiscal by Rs 5,000 crore and the proceeds have touched Rs 85,000 crore. The government has mopped up Rs 9,500 crore from the fifth tranche of CPSE ETF and Rs 14,500 crore from the REC-PFC deal. There will be some buzz in the banking sector stocks with report that the RBI has deferred the implementation of the new accounting norms, Ind AS, indefinitely, as necessary amendments to the relevant law are yet to be made. The move will bring huge relief to the banks which are yet to recognise stressed assets and make necessary provisions as that would require higher capital. There will be some reaction in housing finance companies (HFCs) stocks with ICRA's report that the liquidity crisis has crimped credit growth for HFCs and is unlikely to improve much in FY20, even as the weak external environment will put a pressure on asset quality.


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