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NSE Intra-day chart (23 June 2017)
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Market Commentary 27 June 2017
Markets to make flat-to-positive start on Tuesday


Indian markets finished last trading session of the week on a daunting note, as the frontline equity indices failed to showcase any kind of resilience and kept drifting around lower levels. Sentiments remained subdued with the report that funding of crop loan waivers is likely to worsen the fiscal deficit and leverage levels of state governments with gross state development loans issued by the state governments expected to rise by Rs 70,000 crore in FY2018. So far, Maharashtra and UP have waived nearly 30-40% of outstanding agri-bank credit, while for Punjab it was 15%. The NSE's 50-share broadly followed index, Nifty dipped below the psychological 9,600 support level, while the Bombay Stock Exchange's sensitive index, Sensex a saw triple digit fall to sink below the crucial 31,200 mark. Meanwhile, caution is likely to prevail in the near term as India gears up to unveil a nationwide goods and services tax (GST) on July 1, while monitoring global factors such as falling crude prices. Some weakness also came with the report that asset quality pain for banks is expected to continue in fiscal year ended March 2018 due to restructuring by banks, weakness in some large corporate accounts and events like waiver of farm loans. It expects gross non-performing assets (GNPAs) of Indian banks to increase to 9.9% to 10.2% by March 2018 from 9.5% in March 2017 with fresh slippages of loans expected at 3% to 4% in the fiscal. Investors failed to get any sense of relief with Reserve Bank Governor Urjit Patel's statement that he is not 'overly pessimistic' about employment scenario in the IT sector, pointing out that mushrooming startups can compensate for job losses. He also highlighted that the soon-to-be implemented GST will not only create a national market but will also broaden the tax base which in turn will lower the overall taxes in the long-term. Finally, the BSE Sensex declined 152.53 points or 0.49% to 31138.21, while the CNX Nifty was down by 55.05 points or 0.57% to 9,574.95. 


The US markets closed mostly higher on Monday, but the Nasdaq Composite faltered, putting pressure on the broader market. The Atlanta Federal Reserve's GDP Now forecast model showed that the US economy is growing at a 2.9 percent annualized pace in the second quarter based on the latest data on durable goods orders and new home sales in May. The latest second-quarter gross domestic product estimate was unchanged from the previous reading calculated on June 16. New York Fed President William Dudley, a permanent voter on U.S. interest rates and a close ally of Fed Chair Janet Yellen, said that the recent narrowing of credit spreads, record stock prices and falling bond yields could encourage the Federal Reserve to continue tightening US policy. Dudley has repeatedly warned that the Fed would raise rates more aggressively if financial conditions did not tighten as desired, and vice versa. On the economy front, orders for durable goods such as planes and computers fell in May for the second month in a row and registered the biggest drop in six months, suggesting that an early-year surge has faded. The Dow Jones Industrial Average added 14.79 points or 0.07 percent to 21,409.55, S&P 500 edged higher by 0.77 points or 0.03 percent to 2,439.07, while Nasdaq lost 18.1 points or 0.29 percent to 6,247.15.


Crude oil futures edged marginally higher on Monday, improving from 10-month lows, as buyers found value after the recent collapse. It is thought that numerous Organization of the Petroleum Exporting Countries (OPEC) members cannot cope with low oil prices much longer without risking domestic issues. Venezuela, Saudi Arabia, and others are showing signs of strain. However, OPEC's supply quota plan with Russia has flopped. U.S. producers are flooding the market with oil, keeping prices well below $50 a barrel. Benchmark crude oil futures for June delivery ended up by $0.37 or 0.90 percent to $43.38 on the New York Mercantile Exchange. However, in London, Brent crude for June delivery ended lower by $0.81 percent at $ $45.17 on the ICE.


Snapping three-day losing streak, Indian rupee recovered against the American currency on Friday, on the back of dollar sales by exporters and bank. Sentiments got some support with Urjit Patel's statement that the GST regime will expand the taxation base which in turn will lower the overall tax burden in the long-term. Investors shrugged off the report that funding of crop loan waivers is likely to worsen the fiscal deficit and leverage levels of state governments with gross state development loans issued by the state governments expected to rise by Rs 70,000 crore in FY2018. Besides, dollar weakness against other currencies overseas also supported the rupee sentiment but capital outflows from the domestic equity market restricted the further gains. On the global front, dollar eased against yen on Friday, as investors awaited US inflation data due next week to provide clues on the US Federal Reserve's likely interest rate policy. Finally, the rupee ended at 64.52, 7 paise stronger from its previous close of 64.59 on Thursday.


The FIIs as per Friday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 6638.35 crore against gross selling of Rs 6129.63 crore, while in the debt segment, the gross purchase was of Rs 881.73 crore with gross sales of Rs 674.90 crore.


The US markets ended mostly in green in last session, however gains remained capped as traders seemed uncertain about the near-term outlook for the markets after the Dow and S&P 500 reached record highs last week. Sentiments also remained dampened on report that new orders for U.S. manufactured durable goods fell by more than expected in the month of May. The Asian markets have made mostly a positive start with, some indices gaining about half a percent. The Chinese market was trading with traction, as a weaker yen boosted shares of exporters. The Indian markets lost around half a percent in the last session, showing a lackluster performance and markets remaining in red through the session despite a positive opening. Today, the start is likely to be flat-to-positive. Traders will be eyeing outcome of US President Donald Trump and Prime Minister Narendra Modi meeting, seeking to boost US-Indian relations despite differences over trade, the Paris climate accord and immigration. There will be some buzz in the mining stocks, as the world's biggest coal users China, the United States and India have boosted coal mining in 2017, in an abrupt departure from last year's record global decline for the heavily polluting fuel and a setback to efforts to rein in climate change emissions. The production through May is up by at least 121 million tons, or 6 per cent, for the three countries compared to the same period last year. Banking stocks will also be in focus after the Reserve Bank of India (RBI) has directed banks to keep higher provisions against all cases referred for bankruptcy proceedings. Meanwhile, the finance ministry has made a case for pushing back the Reserve Bank's deadline for implementing Basel III banking norms in view of higher capital requirement to deal with bad loans which have reached unacceptable levels.   


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  • Axis Bank is planning to raise funds by issuing Non-Convertible Debentures of the face value of Rs 10 lakh each for cash at par aggregating to Rs 3,500 crore.
  • HDFC Bank is planning to organize 500 awareness workshops on Goods and Services Tax.
  • Bharti Airtel has launched *121# Digital Care platform in Hindi and 10 more regional languages - Punjabi, Marathi, Gujarati, Tamil, Telugu, Malayalam, Kannada, Bangla, Oriya and Assamese.
  • Kotak Mahindra General Insurance, a subsidiary of Kotak Mahindra Bank, is looking at achieving Rs 200 crore in total premia by the end of FY18.
News Analysis