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Market Commentary 27 June 2016
Markets to start the F&O expiry week on a soft note


Stock markets in India ended the week on a disappointing note with the benchmark equity indices collapsing over two percent and slipping below crucial levels. The frontline indices got off to a gap down opening and tumbled to day's lows in late morning session, but witnessed a strong recovery through the session. Sentiment suffered a jolt following a meltdown in global equities after referendum result indicated Britain would leave the European Union, triggering all-round selling, dragging down the key indices from their crucial levels. Shares of Indian companies having operations and exports to the European Union like pharma and information technology along with auto component manufacturers were among the most impacted. Depreciation in rupee against the dollar also dented sentiments. Indian rupee was trading at 67.92 per dollar at the time of equity markets closing as compared to 67.25 per dollar level on Thursday. However, market participants got some comfort with Reserve Bank of India's (RBI) Governor Raghuram Rajan's statement that RBI would provide liquidity to allow orderly adjustment in the local market following Britain's exit (Brexit) from European Union creating ripples across global markets, while he expects India's strong fundamentals would help it to remain largely immune from the shock. The governor added that India's limited short term liability to the international markets leads to moderate participation, and therefore the impact would be limited. He also said that a good monsoon can lift sentiment and activity should pick up. Some support also came with Finance Minister Arun Jaitley's statement that India's macro-economic fundamentals are sound with a very comfortable external position, a rock-solid commitment to fiscal discipline, and declining inflation. Global cues remained somber as majority of the Asian equity indices finished in the red-zone, while the volatility started in currencies and spread to markets from Asian to European. Back home, finally the BSE Sensex was lost 604.51 points or 2.24% to 26397.71, while the CNX Nifty declined 181.85 points or 2.20% to 8,088.60.


The US markets witnessed bloodbath on Friday with major indices snapping session with a cut of around four percent after Britain surprised markets by voting to leave the European Union. In a referendum, the British people voted 52 percent to 48 percent to leave the EU amid substantial turnout of more than 72 percent. While the so-called Brexit had been discussed intensely across the world in the run up to the poll, the actual decision to leave came as a surprise, sending the British pound to a 31-year low. Global markets were caught off guard and plummeted during the day. Meanwhile, Prime Minister David Cameron announced that he will step down in October. Cameron, who had strongly called for a ‘Remain' vote, said the British people voted to leave the EU and their will must be respected. Sentiments also remained dampened with report from the Commerce Department showing a bigger than expected drop in durable goods orders in the month of May. The Commerce Department said durable goods orders fell by 2.2 percent in May after jumping by 3.3 percent in April. The Dow Jones Industrial Average tumbled 610.32 points or 3.39 percent to 17,400.75, Nasdaq declined 202.06 points or 4.12 percent to 4,707.98 and S&P 500 was down by 75.91 points or 3.59 percent to 2037.41.


Crude oil futures suffered sharp plunge and closed near one-month lows, after voters in Britain approved a referendum triggering UK's departure from the European Union. The trade remained volatile through the session as the leave campaign took a resounding lead and a host of major oil companies issued stark warnings on the dire implications of a UK departure. Traders even overlooked the oil services firm Baker Hughes weekly rig count report which said that US oil rigs fell by seven to 330, marking its first decline in four weeks. The combined oil and gas rig count fell by three to 421. Benchmark crude oil futures for August delivery declined by $2.47 or 4.93 percent to $47.64, after trading in a range of $46.75 and $50.44 a barrel on the New York Mercantile Exchange. In London, Brent crude for August delivery ended at $48.38, down $2.53 or 4.97 percent on the ICE.


Snapping its two day gaining streak, Indian rupee ended weaker against dollar on Friday after the results of a referendum vote showed that more than 50% of Britons voted to break out of the European Union (EU). Besides, dollar demand from banks and importers and losses in domestic equity market too hit the rupee sentiment. On rupee fall, Reserve Bank of India (RBI) Governor Raghuram Rajan said that Indian currency's fall is lesser than many other currencies and the central bank is prepared for any eventuality and will intervene in currency markets when necessary. On the global front, euro fell against the dollar after the U.K. finally voted to move out of the European Union with Brexit officially declared. Finally, the rupee ended 67.96, 71 paise weaker from its previous close a t 67.25 on Thursday.


The FIIs as per Friday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity, the gross buying was of Rs 3328.17 crore against gross selling of Rs 3100.09 crore, while in the debt segment, the gross purchase was of Rs 770.57 crore with gross sales of Rs 1145.64 crore.             


The US markets plunged in last session, with all the major indices witnessing steep losses for the day, reacting to the surprise vote in favor of Britain leaving the European Union on Thursday. The Asian markets have mostly made a weak start, extending their sell-off, though some indices have recovered and were in green too, led by the Japanese market which is up by over a percent on yen weakness. The Indian markets, were massacred along with other global markets in the last session, in a knee-jerk reactions to UK's referendum results, though the major bourses recovered considerably, still there were major cuts at last. Today, the start of the F&O expiry week is likely to remain soft and the Brexit impact will continue to play its role, though Finance Minister Arun Jaitley has said that the impact of the Brexit vote on India would not be significant, as the underlying fundamentals of the economy were robust. Jaitley however, noted that Indian companies with significant operations in the UK would have to tailor their businesses accordingly to deal with the fallout. Markets may see some recovery in latter part of the trade and will be supported by some reports that India may soon roll out a long- term multiple-entry comprehensive visa by merging tourist, business, medical and conference visas into one to attract more visitors and boost trade. Also, the Finance Minister has said that India needs over $ 1.5 trillion in investment in the next 10 years to bridge infrastructure gap as the government intends to connect seven hundred thousand villages with roads by 2019 as part of a massive modernisation plan. The pharmaceuticals, defence and single-brand retail related stocks will keep buzzing, as the government has notified changes in the Foreign Direct Investment (FDI) policy in these sectors.


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Bank of Baroda






  • State Bank of India, country's largest public sector lender, is planning to raise $ 1.5 billion from foreign markets via bonds to fund its expansion and pay off securities maturing in the year.
  • ICICI Bank, India's largest private sector bank has opened a new branch at Belgharia in Kolkata.
  • ITC's packaged food business has crossed the Rs 7,000 crore sales mark in 2015-16, a growth of 10.7% over last fiscal.
  • Ciaz, the first successful sedan and premium car experiment of Maruti Suzuki has touched a milestone of 100,000 units in the domestic market.
  • HDFC will raise Rs 1,035 crore through issuance of debentures on a private placement basis to augment its long-term capital resources.
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