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NSE Intra-day chart (25 June 2018)
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Market Commentary 26 June 2018
Markets to make pessimistic start



Indian equity benchmarks ended the Monday's session on negative note, with Sensex and Nifty breaching their crucial 35,500 and 10,800 levels, respectively. After a cautious start, the key indices traded lackluster throughout the session, amid reports that foreign investors have pulled out over Rs 14,500 crore from the Indian capital markets in June so far, primarily due to global trade war and hawkish commentary by the US Federal Reserve. The latest outflow has taken the total net withdrawal by foreign portfolio investors (FPIs) from the capital markets (equity and debt) to more than Rs 46,600 crore in this year so far. The market participants remained worried with a private report stating that goods and services tax (GST) has not delivered on the promised formalisation of the economy as yet, while the glitches in the one-nation-one-tax regime has increased the demand for cash. Further, in the dying hours of the day, the markets extended their fall to close near day's low point, on the back of heavy selling pressure coupled with weak global cues on worries over a US-China trade war. Adding some pessimism, Reserve Bank of India's (RBI) data showed that India's foreign exchange reserves fell by $3.03 billion to $410.070 billion as on June 15. Foreign currency assets, which form a key component of reserves, fell by $3.05 billion from the previous week to $385.333 billion. Traders paid no heed towards Confederation of Indian Industry's (CII) statement that Indian companies' overseas investments are likely to go up, with the stable market conditions and the significant impact created by Indian companies on local economies. The street also overlooked Union Minister Suresh Prabhu's statement that India is trying to resolve trade disputes with several countries and is willing to create a new world trade order as it extends a hand of friendship to all. Finally, the BSE Sensex fell 219.25 points or 0.61% to 35,470.35, while the CNX Nifty was down by 59.40 points or 0.55% to 10,762.45.


The US markets ended sharply lower on Monday with the losses on over one percent as fresh threats from President Donald Trump against U.S. trading partners underlined how the risk of protectionist policies has not left the market. Trump said that the United States is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the U.S.A. Trade must be fair and no longer a one way street. This may be aimed at the European Union, which recently began implementing tariffs on $3.2 billion in U.S. imports. Trump responded by threatening 20% tariffs on European cars entering the U.S. Sentiment further dampened as Trump plans to bar several Chinese companies from making investments in U.S. tech. the administration wants to block additional technology exports to China. Both measures are expected to be announced by the end of the week. Besides, traders have largely shrugged off report from the Commerce Department showing a bigger than expected rebound in new home sales in the month of May. The Commerce Department said new home sales spiked by 6.7 percent to an annual rate of 689,000 in May after plunging by 3.7 percent to a revised rate of 646,000 in April. Street had expected new home sales to climb by 1.5 percent. The bigger than expected increase in new home sales was on account of a surge in home sales in the South, which shot up by 17.9 percent to a rate of 409,000. However, the Chicago Fed national activity index for May fell to -0.15 in May from +0.42 in April. The Dow Jones Industrial Average lost 328.09 points or 1.33 percent to 24252.80, the S&P 500 declined 37.81 points or 1.37 percent to 2717.07 and the Nasdaq dropped by 160.81 points or 2.09 percent to 7532.01.


Crude oil futures ended lower on Monday on account of some uncertainty in the wake of an agreement by the Organization of the Petroleum Exporting Countries to ramp up production that was backed by non-member Russia. Ministers from OPEC and non-OPEC producers said they agreed that countries will strive to adhere to the overall conformity level, voluntarily adjusted to 100%- meaning that the countries involved in the original production pact will no longer lag behind others in crude production under the output-cut pact. Benchmark crude oil futures for August delivery declined 50 cents or 0.7 percent to settle at $68.08 a barrel on the New York Mercantile Exchange. August Brent crude fell 82 cents or 1.1 percent at $74.73 a barrel on London's Intercontinental Exchange.


Snapping 3-day winning streak against the American currency, Indian rupee ended considerably weaker on Monday, as demand for the American unit from importers and banks picked up. Traders remain worried with reports that foreign investors have pulled out over Rs 14,500 crore from the Indian capital markets in June so far, primarily due to global trade war and hawkish commentary by the US Federal Reserve. Adding to the rupee woes, Reserve Bank of India's (RBI) data showed that India's foreign exchange reserves fell by $3.03 billion to $410.070 billion as on June 15. Foreign currency assets, which form a key component of reserves, fell by $3.05 billion from the previous week to $385.333 billion. Moreover, a weak equity market also put pressure on the rupee. On the global front, US dollar declined against its major counterparts on Monday, as trade war fears showed no sign of abating. Finally, the rupee ended at 68.13, 31 paise weaker from its previous close of 67.82 on Friday.


The FIIs as per Monday's data were net buyer in equity and net seller in debt segments. In equity segment, the gross buying was of Rs 7530.63 crore against gross selling of Rs 6289.78 crore, while in the debt segment, the gross purchase was of Rs 444.97 crore with gross sales of Rs 669.45 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.28 crore against gross selling of Rs 0.26 crore.


The US markets ended sharply lower on Monday, as the latest jabs between the White House and Beijing exacerbated fears among investors of a full trade war. Asian markets were trading in red on Tuesday, as rising tensions between the US and other major countries especially China continued to weigh on markets sentiments. Indian equity markets ended lower on Monday, largely in tandem with a global market sell-off triggered by deteriorating trade relations between the US and China. Today, the start is likely to be in negative, as traders will be concerned about the Reserve Bank of India's (RBI) report that Indian companies' investments into their overseas subsidiaries/joint ventures fell by 63% to $1.17 billion in May this year. Traders will also be reacting to interim finance minister Piyush Goyal's statement that creating infrastructure will need $4.5 trillion investments over the next decade and the cost of the money will be a challenge. Besides, as per a private report the RBI is expected to push key policy rates higher again in order to keep inflation in check. However, traders will be getting some support later in the trade with Employees' Provident Fund Organisation's (EPFO) payroll data showing that as many as 41.26 lakh new jobs were created in the eight months till April this year, with largest ever addition of 6.85 lakh in April alone. Meanwhile, the government has further extended the ban on import of milk and its products, including chocolates, from China for six months till December 23. There will be buzz in infrastructure related stocks with report that the Beijing-based Asian Infrastructure Investment Bank (AIIB) announced an equity investment of $100 million in India's National Investment & Infrastructure Fund (NIIF) to help various development projects in the country.

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  • Tata Motors' subsidiary -- Jaguar Land Rover -- has planned investments worth around Rs 1.2 lakh crore over next three years on new models, technology development and capacity addition.
  • Lupin is planning to launch around 30 generic products in the US market this year.
  • Asian Paints is investing around Rs 4,000 crore at its Visakhapatnam and Mysuru facilities in the current fiscal year, with an aim to add 1.1 million kilo litre to its present output.
  • Dr. Reddy's has lost a legal battle with Eli Lilly and Company in a patent litigation on Alimta in the USA.
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