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NSE Intra-day chart (24 September 2018)
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Market Commentary 25 September 2018
Markets likely to make cautious start amid weak global cues


Extending losing streak for fifth straight session, Indian equity benchmarks witnessed bloodbath on Monday, with frontline gauges ending below their crucial 36,400 (Sensex) and 11,000 (Nifty) levels. Markets started the session on cautious note and never looked in recovery mood to end near intraday low levels. Sentiments remained dampened since beginning of the trade on industry chamber CII's report that over 40 per cent of Indian firms expect the Reserve Bank of India (RBI) will go in for another interest rate hike in the current fiscal. A CII release said that its quarterly Business Confidence Index (BCI), conducted during July-September 2018, covered nearly 200 firms of varying sizes. In the current survey, about 42 per cent of the respondents felt that the RBI will engage in further interest rates hikes in 2018-19 as compared to the previous survey where a majority of the respondents anticipated a cut or no change in policy rates in 2018-19. Traders remain concerned with report that overseas investors have pulled out a massive Rs 15,365 crore from the capital markets till September 21, after putting in funds during the previous two months, on widening current account deficit coupled with global trade tensions. Markets extended southward journey in second half to end near intraday lows, as traders remain with Moody's Investors Service's latest report stating that the government's measures to boost capital inflow in to the country is unlikely to reverse the rupee depreciation. Moody's further noted that steps to reduce non-essential goods import may provide support to contain the imports bill, but will likely have a lagged effect. Traders failed to get any sense of relief with report that Fitch Ratings has raised India's growth forecast for the current fiscal to 7.8 percent, from 7.4 percent projected earlier. In its Global Economic Outlook, Fitch, however, flagged tightening of financial conditions, rising oil bill and weak bank balance sheets as headwinds to growth. Traders shrugged off report that the southwest monsoon is expected to start withdrawing towards the end of this month, nearly a month behind schedule. This year's delayed withdrawal is likely to help the country avoid a drought situation, even as countrywide rainfall is hovering on borderline drought conditions, measuring 10% below normal levels since the beginning of the monsoon season. Finally, the BSE Sensex declined 536.58 points or 1.46% to 36,305.02, while the CNX Nifty was down by 175.70 points or 1.58% to 10,967.40.


The US markets settled mostly in red on Monday, amid news China has canceled trade talks with the U.S. as tariffs on billions of dollars' worth of goods take effect. While Wall Street has repeatedly ignored the threat of rising trade tensions, focusing instead on strong economic data and corporate fundamentals, there remains concerns that the situation could escalate into a full-blown trade war, which could have a more severe impact on global demand and growth. Traders seem somewhat reluctant to make more significant moves, however, with the upcoming Federal Reserve meeting keeping some traders on the sidelines. The Fed is scheduled to announce it latest monetary policy decision on September 26 and is widely expected to raise interest rates by another quarter point. The accompanying statement is likely to attract considerable attention along with Fed Chairman Jerome Powell's press conference as traders attempt to gauge the outlook for further rate hikes. The S&P 500 slipped 10.30 points or 0.35 percent to 2,919.37 and Dow Jones Industrial Average was down by 181.45 points or 0.68 percent to 26,562.05, while Nasdaq surged 6.29 points or 0.08 percent to 7993.25.


Crude oil futures settled higher on Monday, as crude exports from Iran dropped and top oil producers signaled they are not in rush to increase production. Crude exports from Iran dropped down, and more reduction is likely with U.S. sanctions on Iranian oil set to take effect from November. Meanwhile, leading oil producers, led by Saudi Arabia and Russia signaled they were in no hurry to increase output. Meanwhile, U.S. President Donald Trump had called on the OPEC countries to lower prices last week. Saudi Energy Minister Khalild al-Falih said on Sunday that he does not influence prices. Benchmark crude oil futures for October gained $1.30 or 1.8 percent to settle at $72.08 a barrel on the New York Mercantile Exchange. November Brent crude was up by $2.40 or 3.10% to settle at $81.20 a barrel on London's Intercontinental Exchanged.


Indian rupee ended considerably weaker against the US dollar on Monday, tracking panic selling in the local equity markets. Investors remain concerned with CII report that over 40 per cent of Indian companies surveyed by industry chamber CII are expecting that the Reserve Bank will go in for a further hike in interest rates in the current fiscal. Investors ignored the report that Fitch Ratings has raised India's growth forecast for the current fiscal to 7.8 percent, from 7.4 percent projected earlier. In its Global Economic Outlook, Fitch, however, flagged tightening of financial conditions, rising oil bill and weak bank balance sheets as headwinds to growth. Moreover, the greenback's strength against other currencies overseas also put pressure on the rupee. On the global front, dollar edged higher on Monday, snapping a two-week losing streak, as investors bought the greenback before a widely expected interest rate hike by the U.S. central bank this week while trade war concerns checked investor appetite for risk. Finally, the rupee ended at 72.63, 43 paise weaker from its previous close of 72.20 on Friday.


The FIIs as per Monday'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 15358.98 crore against gross selling of Rs 14533.53 crore, while in the debt segment, the gross purchase was of Rs 1812.44 crore with gross sales of Rs 1314.97 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.65 crore against gross selling of Rs 4.48 crore.


The US markets closed mostly lower on Monday as the US-China trade war entered a new phase when tariffs on billions of dollars of products took effect. Investors also remained on sidelines looking ahead to the Federal Reserve's two-day monetary policy meeting. Asian markets were exhibiting mixed trend in early deals on Tuesday, as investors pondered concerns about the outlook for global trade and American politics. Equities climbed in Japan as traders returned from a holiday, though Chinese shares headed in the opposite direction after a long weekend. Indian equity benchmarks came under heavy selling pressure on Monday as trade tensions persisted and oil prices jumped around 2 percent on signs of tightening global supply, aggravating concerns over the risk of twin deficits. Today, the markets are likely to make cautious start on weak global cues. Traders may remain concerned with private report stating that India's current account deficit (CAD) is expected to be widened by 0.20 per cent to 2.8 per cent of GDP for fiscal year 2018-19. The widening current account gap is one of the major concerns which is putting pressure on the rupee, which has depreciated 13 per cent against dollar this year. Traders may take note of World Bank's report that India's current trade in goods with its neighbouring countries in the South Asian region is a mere 30.65 per cent of the potential trade of $ 62 billion, which can be boosted if certain restrictions on the current trade, like tariffs, port restrictions and other non-tariff barriers can be eased. Meanwhile, the government has extended by a fortnight till October 15 the deadline for filing Income Tax Return (ITR) and audit report for financial year 2017-18. The Central Board of Direct Taxes (CBDT) had received representations from stakeholders seeking extension of the last date for filing of returns by taxpayers whose accounts have to be audited. There will be buzz in oil and gas related stocks as fuel prices increased, with petrol registering a record high of Rs 90.22 a litre in Mumbai. Diesel prices too rose in the financial capital to Rs 78.69 a litre. Stocks related to public sector banks (PSBs) will be in focus as Finance Minister Arun Jaitley will hold the annual review meeting with chief executives and the top management of PSBs on September 25.


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