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NSE Intra-day chart (26 July 2016)
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Market Commentary 27 July 2016
Markets to get a cautious but positive start of the penultimate session of F&O expiry


Stock markets in India capitulated by around half a percent on Tuesday after showing signs of consolidation in early trade, as discouraging Q1 numbers spooked investors' sentiments in the dying hours of trade. Dr Reddy's Laboratories, one of India's largest and most respected global pharmaceutical companies, missed the street's expectations on all counts with consolidated profit falling sharply by 76.3% year-on-year (Y-o-Y) to Rs 153.5 crore in Q1FY16, hit largely by US business and weak operational performance. Further, TVS Motor also slid after the company reported profit growth, which lagged street estimates. The company reported 21.15% rise in its net profit at Rs 121.25 crore for the quarter ended June 30, 2016, as compared to Rs 100.08 crore for the same quarter in the previous year. Sentiments remained subdued with the report that sectors like construction, iron & steel, chemicals continued to face financial stress with dip in margins and profitability leading to higher number of credit rating downgrades in the June quarter. Further upside risks to price rise still prevails, largely owing to increasing international commodity prices and implementation of the seventh pay commission awards, while CPI inflation is likely to be in the range of 5.7-5.9% in July. According to a private report, structural issues in the inflation dynamics continue to prevail as rural CPI inflation on average remains above the urban CPI inflation. Meanwhile, investors remained uncertain about the much-delayed goods and services tax (GST) bill would be cleared as state finance ministers meet to discuss it ahead of a debate in the Rajya Sabha, the upper house of Parliament.  The GST Bill, which intends to convert 29 states into a single market through a new indirect tax regime, was earlier planned to be introduced from April 1 this year, but the deadline was missed as the legislation to roll it out remains in limbo in the Opposition-dominated Rajya Sabha. On the global front, Asian markets ended mostly in green on Tuesday, while European stocks were little changed in early deals. Back home, after starting the session on cautious note, Indian benchmark indices traded near neutral line, altering between positive and negative territory, for most part of the session, but saw a heavy flow of selling in final hour of trade on account of disappointing quarterly numbers by some blue-chip firms. Finally, the BSE Sensex ended lower by 118.82 points or 0.42% to 27976.52, while the CNX Nifty dropped 45 points or 0.52% to 8,590.65. 


The US markets closed mostly higher on Tuesday, with the Nasdaq Composite touching a 2016 high outshining its main stock-market benchmarks. Investors were reluctant to carve out big positions as the Federal Reserve kicked off its two-day monetary policy meeting, with an updated statement due Wednesday. The Federal Open Market Committee marks its first gathering since the UK voted to leave the European Union on June 23, which resulted in global markets convulsing, highlighted by a selloff in assets perceived as risky. On the economy front, the new-home sales in June rose to a seven-year high while the Case-Shiller home-price index also inched up in May. New home sales jumped in June as sales data from prior months were revised upward, further signaling sturdy demand in the housing market. June sales rose 3.5% to a seasonally adjusted annual rate of 592,000. That was the strongest since February 2008, beating the 560,000 forecast. Meanwhile, the US house prices, as the S&P CoreLogic Case-Shiller 20-city composite, saw a 0.9% gain in May to stretch the 12-month advance to 5.2%. The Nasdaq added 12.42 points or 0.24 percent to 5,110.05, S&P 500 gained 0.7 points or 0.03 percent to 2,169.18, while the Dow Jones Industrial Average was down by 19.31 points or 0.10 percent to 18,473.75.


Crude oil futures slipped further low on Tuesday, touching the fresh three months low, ahead of the American Petroleum Institute's latest weekly inventory report. Traders failed to get any support with report that World Bank is raising its 2016 forecast for crude oil prices to $43 per barrel from $41 per barrel. Traders remained concerned to the oversupply in crude and refined product, even as inventories retreat from near record-highs. Benchmark crude oil futures for September delivery was down by $0.25 or 0.58 percent to close at $42.83 a barrel after trading in a range of $42.38 and $43.37 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for October delivery gained $0.06 or 0.13 percent to $45.19 a barrel on the ICE.


Indian rupee ended stronger against dollar on Tuesday due to selling of American currency by banks and exporters. Sentiments got some support ahead of Finance Minister Arun Jaitley's meeting with his counterparts in states to discuss proposed amendments to the GST Bill and with Minister of State for Finance Arjun Ram Meghwal stating that Government is working overtime to build a consensus on the long-pending Goods and Services Tax bill with the hope of getting it passed during the ongoing Parliament session. On the global front, dollar slipped ahead of a two-day Federal Reserve policy meeting this week, which will be closely watched for clues on the outlook for US interest rates. Finally, the rupee ended 67.27, 8 paise stronger from its previous close at 67.35 on Monday


The FIIs as per Tuesday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 5011.89 crore against gross sell of Rs 4208.23 crore. While in the debt segment, the gross purchase was of Rs 425.62 crore with gross sales of Rs 404.48 crore.


The US markets remained mostly flat in the last session with traders reluctant to make any bet ahead of Wednesday's Federal Reserve decision, even though the Fed is widely expected to leave interest rates unchanged. The Asian markets have made mostly a positive start, with the Japanese market rebounding after three straight session of fall, as the yen retreated amid speculation over the outlook for Japanese stimulus. The Indian markets completely lost their way in final hours and ended lower by around half a percent in last session. Today, the start of the penultimate session of the F&O series expiry is likely to be in green, though some volatility too can be expected and traders will be eyeing the US Fed's decision. Traders will also be concerned with a panel of state finance ministers failing to reach a consensus that would enable the government to get the Constitutional Amendment Bill for Goods and Services Tax (GST) passed in the Rajya Sabha. All states were of the view that the tax rates put forward by the Chief Economic Advisor are not acceptable, however there was consensus to keep the GST rate out of the Constitutional Amendment Bill. Meanwhile, the outgoing RBI governor Raghuram Rajan has said that governments should look beyond 'uninformed and motivated' public criticism and protect the independence of their central banks to ensure stable sustainable growth. He also said that the slowdown in credit growth has been largely because of stress in public sector banks stemming from past mistakes in lending and will not be fixed just by a cut in policy rates. There will be some buzz in the Aviation stocks on report that air traffic in India grew by a strong 22 per cent between January and June. Air traffic grew at double-digit pace in June, with airlines reporting robust occupancy figures. There will be lots of important earnings announcements too, to keep the markets buzzing.


                       Support and Resistance: CNX Nifty and BSE Sensex


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  • Dr Reddys Laboratories has reported 17.09% fall in its net profit at Rs 409.10 crore for the quarter ended June 30, 2016 as compared to Rs 493.40 crore for the same quarter in the previous year.
  • Axis Bank and ICICI Bank have become the first domestic lenders to sign up for SWIFT's global payments innovation initiative, which already has over 70 other leading banks globally.
  • Tata Motors, the country's largest automotive player, is planning to raise Rs 400 crore through issuance of non-convertible debentures.
  • Ultratech Cement is planning to raise Rs 300 crore through secured redeemable Non-Convertible Debentures on private placement basis.
  • State Bank of India, the country's largest lender has tied-up with Indian Oil Corporation to implement the bank's financial inclusion programme for farmers through the oil company's Kisan Seva Kendras.
News Analysis