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NSE Intra-day chart (26 March 2019)
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Market Commentary 27 March 2019
Markets to make a pessimistic start amid mixed cues from Asian peers


Indian equity benchmarks bounced back on Tuesday to settle trading session with strong gains of over a percent. After slightly higher start, the markets traded lackluster with marginal gains for the most part of the day, affected by a private report stating that food inflation in the country is likely to go up to 2 percent in fiscal year 2019-20 from the 0.7 percent estimated for FY19. Adding some worries among the market participants, the Employees State Insurance Corporation (ESIC) in its latest ‘payroll data' report said that job creation dropped by 6.91% in January 2019 to 11.23 lakh as compared to 12.06 lakh in the same month last year. Market gains were also limited, with state-run India Meteorological Department's (IMD) statement that its study of global models shows that there is little chance of a strong El Nino in 2019. A strong El Nino could have an adverse impact on India's southwest monsoon that starts from June as almost 80 per cent of El Nino years have seen below normal rains. However, the key indices gained the momentum in the last hours of the trade to settle near day's high points. Domestic sentiments got boost with the finance ministry's statement that the liquidity situation in the economy was comfortable, and it will improve further with the central bank's move to infuse Rs 35,000 crore through the rupee-dollar swap arrangement, announced last week. Investors took encouragement, after the Vice President of India, M. Venkaiah Naidu called for a renewed focus on agribusiness, value addition and diversification of agriculture to make farming much more sustainable, profitable and rewarding. Some support also came with a report stating that India's share in the final consumption of consumer goods is expected to double by 2030 and the favourable demographics will soon take it ahead of China in regional market dynamics. Some relief also came with reports that the commerce ministry introduced an online system for exporters to obtain export licence for restricted category goods, a move aimed at promoting paperless work and ease of doing business. Finally, the BSE Sensex rose 424.50 points or 1.12% to 38,233.41, while the CNX Nifty was up by 129.00 points or 1.14% to 11,483.25.


The US markets ended higher with gains of over half a percent on Tuesday on the back of rebound by bond yields, with the yield on the benchmark ten-year note initially moving higher after falling sharply over the past few sessions. A recent inversion of the yield curve, with the yield on the ten-year note falling below the yield on three-month bills, raised concerns about an impending recession. Meanwhile, US-China trade negotiations resumed, reigniting some optimism that the high-stakes dispute was coming to a close. Cabinet-level trade negotiations between Beijing and Washington were scheduled to kick off, with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin due in China later this week to help conclude long-running discussions between the world's two largest economies. On the economic front, reflecting a deterioration in consumers' assessment of current conditions, the Conference Board released a report showing an unexpected decrease in US consumer confidence in the month of March. The Conference Board said its consumer confidence index dropped to 124.1 in March after jumping to 131.4 in February. Street had expected the index to rise to 133.0. Meanwhile, new residential construction in the US pulled back sharply in February after jumping in the previous month, according to a report released by the Commerce Department. The report said housing starts plunged by 8.7 percent to an annual rate of 1.162 million in February after surging up by 11.7 percent to a revised rate of 1.273 million in January. The Commerce Department said building permits also fell by 1.6 percent to an annual rate of 1.296 million in February after dipping by 0.7 percent to a revised rate of 1.1317 million in January. Dow Jones Industrial Average surged 140.90 points or 0.55 percent to 25657.73, Nasdaq gained 53.98 points or 0.71 percent to 7691.52 and S&P 500 was up by 20.10 points or 0.72 percent to 2818.46.


Crude oil futures settled higher on Tuesday as reductions in global production led by Organization of the Petroleum Exporting Countries (OPEC), as well as supply declines brought on by US sanctions on Iran and Venezuela. Members of OPEC and other major oil producers, including Russia, have pledged to curb crude production by around 1.2 million barrels a day from October levels for the first half of this year to prop up markets. Meanwhile, market participants will keep an eye on Middle East developments around Gaza, should tensions expand, although reports had yet to factor significantly in the futures market. Benchmark crude oil futures for May rose $1.12 or 1.9 percent to settle at $59.94 a barrel on the New York Mercantile Exchange. May Brent crude gained 76 cents or 1.1 percent to settle at $67.97 a barrel on London's Intercontinental Exchange.


Indian rupee erased most of its intraday gain and ended marginally higher on Tuesday on selling of dollars by banks and exporters. Sentiments remained positive with the finance ministry's statement that the liquidity situation in the economy was comfortable, and it will improve further with the central bank's move to infuse Rs 35,000 crore through the rupee-dollar swap arrangement, announced last week. A spectacular relief rally in local equities also supported the forex sentiment. But most of the gains were trimmed as anxiety remained among the traders with a report that Food inflation in the country is likely to go up to 2% in fiscal year 2019-20 from the 0.7% estimated for FY19. On the global front, euro steadied on Tuesday after economic surveys showed tentative signs of a recovery in the euro zone economy but warning signs from bond markets continued to unnerve investors. Finally, the rupee ended at 68.86, 10 paise stronger from its previous close of 68.96 on Monday.


The FIIs as per Tuesday'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 5932.28 crore against gross selling of Rs 6592.80 crore, while in the debt segment, the gross purchase was of Rs 5940.13 crore with gross sales of Rs 2412.96 crore. Besides, in the hybrid segment, the gross selling was of Rs 1.43 crore against no buying.


The US markets rose on Tuesday as investors overlooked lackluster housing and consumer data, with energy and pharmaceutical stocks among the leaders. Asian markets are trading mixed on Wednesday amid lingering fears that the global economy is slowing down. Indian markets snapped tow-day losing streak and ended higher on Tuesday mainly on the back of late hour buying amid positive leads from Asian markets coupled with persistent foreign fund inflows. Today, the start is likely to be in red tracking mixed cues from Asian peers amid global growth concerns. On the domestic front, there will be some cautiousness as former Reserve Bank of India (RBI) Governor Raghuram Rajan expressed doubts over Indian economy growing at 7 per cent when not enough jobs were being created and said the current cloud over the Gross Domestic Product (GDP) numbers must be cleared by appointing an impartial body to look at the data. Meanwhile, he said that India needs to focus on the resolution of farm distress rather than loan waivers which kill the credit culture. He added that the other focus area should be creation of jobs which the people want. However, some support may come with report that the RBI has received a good response to its dollar swap window on March 26, establishing the instrument as a credible liquidity tool and paving the way for more such auctions in the coming months. Banks offered $16.31 billion for the proposed swaps of up to $5 billion. The RBI accepted $5.02 billion at a cut-off premium of Rs 7.76 for three-year dollars - close to the rate at which the market was trading at. Besides, a private report indicated that although 2018 brought some cyclical challenges, India maintains top ranking in overall consumer sentiment, while Brazil has overtaken China to come second. There will be some reaction in power sector stocks with the secretary of ministry of renewable energy's statement that India will launch $5 billion of transmission-line tenders in phases, beginning in June, to route a targeted 175 gigawatts (GW) of power from renewable sources into the country's grid by 2022. Meanwhile, state-owned Rail Vikas Nigam (RVNL) has fixed a price band of Rs 17-19 per equity share for its upcoming initial public offering (IPO), which would run from March 29-April 3, to raise about Rs 481 crore.


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