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NSE Intra-day chart (26 May 2020)
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Market Commentary 27 May 2020
Markets to get negative start amid economic growth concerns

 

In a volatile session, Indian equity benchmarks failed to hold on to their opening gains and ended with minor losses on Tuesday, as spiking number of COVID-19 cases in the country created an uncertainty about lockdown measures going ahead. Key indices made an optimistic start and traded in fine-fettle, following positive cues from other Asian markets. Traders took support with Securities and Exchange Board of India (SEBI) in its latest data showing that the share of foreign portfolio investments (FPIs) in domestic capital markets through participatory notes (P-notes) increased to Rs 57,100 crore at the end of April after falling to over 15-year low of Rs 48,006 at the end of the preceding month. Trading sentiments remained optimistic in afternoon deals as Union Minister for MSME and Road Transport and Highways, Nitin Gadkari said that the government is exploring new financial lending institutions to support small-scale units in terms of financial support. Gadkari said that government is working towards strengthening the NBFCs which will help small businesses to avail easy credit in the coming time. However, key indices gave up all the day's gains and slipped into negative territory in the last hour of the trade, as sentiments turned pessimistic with credit rating agency, India Ratings and Research's (Ind-Ra) report stated that the aggregate fiscal deficit of states is expected to now rise to 4.5 per cent of gross domestic product (GDP) in FY21 as against the agency's earlier forecast of 3 per cent. Some concern also came with ICRA's report that the sudden pause in economic activity in many sectors after the commencement of the lockdown and its associated impact on profitability, are expected to have dampened GDP growth to 1.9 percent in Q4 FY20, despite the healthy trends in the Rabi season. Finally, the BSE Sensex lost 63.29 points or 0.21% to 30,609.30, while the CNX Nifty was down by 10.20 points or 0.11% to 9,029.05.

 

The US markets ended higher on Tuesday as investors were emboldened by fresh coronavirus vaccine news and signs that global economies are crawling back from the pandemic shutdown. Novavax Inc. said it started human trials of its vaccine candidate in Australia. The first phase of the placebo-controlled study will enroll 135 healthy adults and the preliminary round of data from that study is expected in July. Big drugmaker Merck & Co. also said it would soon have two potential vaccines under its umbrella and an experimental drug against the coronavirus, joining rivals in the frantic search for medicines. Investors were focusing on positive signs in the global economy, news of the gradual removal of economic restrictions related to COVID-19 and signs that Americans are beginning to feel safe enough to travel and congregate in larger groups. However, amid the race for a medical breakthrough, the World Health Organization's top health expert warned of a long battle to contain the pandemic. Meanwhile, US-China relations remain tense. Hong Kong's leader Carrie Lam brushed aside concerns about a Chinese power grab in the territory, after House national security adviser Robert O'Brien over the weekend threatened to sanction China if it carries through with plans for new national security laws in Hong Kong, where protests have reignited. Also, the US said that a move by China to tighten its grip on Hong Kong could threaten the city's status as a financial hub.

 

Crude oil futures ended higher on Tuesday on rising optimism that relaxation in lockdown restrictions in several countries across the world. Also, with the Organization of the Petroleum Exporting Countries (OPEC) and its allies committed to a significant reduction in crude outputs, concerns about demand-supply mismatch appear to be easing now. Meanwhile, the consistent decline in US oil rigs count for the past several weeks too has raised hopes the supply level will come down soon. Crude oil futures for July rose $1.10 or 3.3 percent to settle at $34.35 a barrel on the New York Mercantile Exchange. July Brent crude gained 64 cents or 1.8 percent to settle at $36.17 a barrel on London's Intercontinental Exchange.

 

Indian rupee gained ground against dollar and ended higher on Tuesday, on persistent selling of the American currency by exporters. Traders took encouragement with Niti Aayog Vice Chairman Rajiv Kumar's statement that there is a need to convert development into mass movement, and India should aspire to become second or third largest economy in the world by 2047. Traders overlooked credit rating agency, India Ratings and Research's (Ind-Ra) report that the aggregate fiscal deficit of states is expected to now rise to 4.5 per cent of gross domestic product (GDP) in FY21 as against the agency's earlier forecast of 3 per cent. On the global front, dollar inched lower on Tuesday as growing optimism about a global recovery from the COVID-19 pandemic supported riskier currencies, though concerns about Sino-U.S. tensions held further moves in check. Finally, the rupee ended at 75.66, 29 paise stronger from its previous close of 75.95 on Friday.

 

The FIIs as per Tuesday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 4422.19 crore against gross selling of Rs 5552.76 crore, while in the debt segment, the gross purchase was of Rs 508.25 crore with gross sales of Rs 816.88 crore. Besides, in the hybrid segment, the gross buying was of Rs 6.89 crore against gross selling of Rs 5.17 crore.

 

The US markets ended higher on Tuesday as optimism grew about the reopening of the economy and a potential coronavirus vaccine. Asian markets are trading mixed on Wednesday as rising US-China tensions tempered optimism about the global economy recovering from the coronavirus outbreak. Indian markets wiped out early gains and ended marginally lower on Tuesday, as concerns about rising coronavirus cases in the country overshadowed positive cues from global markets. Today, the markets are likely to open in red amid mixed Asian cues and economic growth concerns. There will be some cautiousness with rising coronavirus cases in India. In the last 24 hours, India recorded a spike of 6,535 new COVID-19 cases and 146 deaths.  The total number of cases in the country now stands at 1,45,380 including 80,722 active cases, 60,490 cured/discharged. Ministry of Health and Family Welfare said the death toll has reached 4,167. Traders will be concerned as Fitch Ratings forecast a 5 percent contraction of Indian economy in the current fiscal, on account of slump in economic activities and very stringent lockdown policy. This is substantially lower than 0.8 percent growth for 2020-21 fiscal projected in April. Also, highlighting the grave economic impact of COVID-19, Crisil has said India is staring at its worst recession since Independence. However, some support may come later in the day with report that the government notified the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme for Medium, Small and Micro Enterprises (MSMEs) under the Atma Nirbhar Bharat Abhiyan to help them tide over the economic distress being faced due to the COVID-19 pandemic. Some encouragement may also come with Union Minister for MSMEs and Road Transport and Highways, Nitin Gadkari's statement that the government is exploring new financial lending institutions to support small-scale units in terms of financial support. Traders may take note of the Confederation of Indian Industry's (CII) report stating that despite the relaxations and packages announced for the farm sector following the Covid-19 lockdown, logistics of perishables commodities such as fruits and vegetables could be further streamlined to ensure remunerative return to farmers who have seen sharp drop in demand due to lockdown. Power stocks will be in focus with India Ratings and Research's (Ind-Ra) statement that the Rs 90,000 crore package would provide only a temporary relief to power distribution companies but not long-term stability.

 

Support and Resistance: NSE (Nifty) and BSE (Sensex)

 

Index

Previous close

Support

Resistance

NSE Nifty

9,029.05

8,963.25

9,128.25

BSE Sensex

30,609.30

30,385.39

30,385.39

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Bharti Airtel

764.97

559.25

552.38

571.28

ITC

532.36

191.70

188.02

195.17

State Bank of India

482.81

151.40

150.00

153.00

ICICI Bank

466.85

292.70

289.17

297.07

Tata Motors

380.18

83.10

81.90

85.00

 

  • ITC has entered into a Share Purchase Agreement to acquire 100% of the equity share capital of Sunrise Foods. 
  • Infosys has entered into strategic partnership with Avaloq to provide end-to-end wealth management capabilities through digital platforms. 
  • Tata Motors has raised Rs 1000 crore through Rated, Listed, Secured, Redeemable, Non-Convertible Debentures on private placement basis. 
  • Maruti Suzuki India has partnered with ICICI Bank to offer customised auto retail financing solutions across the country.
News Analysis