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NSE Intra-day chart (27 February 2018)
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Market Commentary 28 February 2018
Markets likely to make pessimistic start ahead of GDP data


Indian equity benchmarks ended the Tuesday's trade in red terrain as traders opted to remain on sidelines ahead of Gross Domestic Product (GDP) numbers for December quarter to be released on Wednesday. Despite making an optimistic start markets turned negative and traded choppy throughout the session, as traders remained concerned on report that investments in the domestic capital market through participatory notes (P-notes) plunged to a nearly eight-and-a-half-year low of Rs 1.19 lakh crore in January-end amid stringent norms put in place by regulator SEBI to check misuse. Traders also remained worried on private report stating that inflation is expected to trend higher and though RBI may keep policy rates on hold in 2018-19, there are also increasing chances of a rate hike. Sentiments remained downbeat, as the government categorised around 9,500 non-banking financial companies -- about 80 per cent of the NBFCs in the country -- as high risk prone as they have not complied with a stipulated provision of the anti-money laundering law. However, losses remained capped as traders get some relief with report that India's economic recovery is expected to have gathered momentum as economists expect India's GDP to grow 6.9 percent in the December quarter, the fastest pace in a year and up from 6.3 percent in July-September quarter, on the back of increased spending by consumers, businesses and the government. Investors also got some solace with economic think-tank NCAER's report that the Indian economy is projected to grow at 6.7 per cent in the current financial year and 7.5 per cent in 2018-19. The figures are in line with the growth projections in this year's Economic Survey, which said India is likely to clock 7-7.5 per cent growth in 2018-19, up from 6.75 per cent in the current fiscal. Some support also came with report that the government plans to cut red tape and ease rules for foreign portfolio investors (FPI), as it seeks to attract more investments into Asia's third-largest economy. Finally, the BSE Sensex shed 99.36 points or 0.29% to 34,346.39, while the CNX Nifty was down by 28.30 points or 0.27% to 10,554.30.


The US markets closed lower on Tuesday, after Federal Reserve Chairman Jerome Powell highlighted the strengthening economy during his congressional testimony, but investors grew jittery that improvement may prompt the central bank to be more aggressive in tightening monetary policy. Federal Reserve Chairman Jerome Powell, in his first public appearance as head of the US central bank, vowed to prevent the economy from overheating while sticking with a plan to gradually raise interest rates. On the economy front, an early look at US trade patterns in January points to another increase in the nation's trade deficit that is likely to act as a drag on first-quarter gross domestic product. The trade gap in goods - services are excluded - rose 3% to $74.4 billion last month. The government will release overall trade numbers for January next week, but the size of the deficit is tied to changes in exports and imports of goods. Trade patterns involving services rarely change much from month to month. Advanced reports for retail and wholesale inventories, meanwhile, both increased in January. Retail inventories jumped 0.8% and wholesale inventories climbed 0.7%. On the other hand, consumer confidence surged in February, the first month Americans started to benefit from the Trump tax cuts, to the highest level since November 2000. The Dow Jones Industrial Average lost 299.24 points or 1.16 percent to 25,410.03, Nasdaq was down by 91.11 points or 1.23 percent to 7,330.35 and S&P 500 dropped 35.32 points or 1.27 percent to 2,744.28.


Crude oil futures edged lower on Tuesday, trimming recent gains as the dollar strengthened versus major rivals. The dollar rallied on perceived hawkish remarks from new Federal Reserve Chair Jerome Powell. In Powell's view, the recent stock market correction will not convince the Fed to delay raising interest rates. The crude prices also decline on expectations that upcoming weekly data will show an increase in US crude inventories. There is a forecast that data would show U.S. crude inventories rose by 2.7 million barrels last week. U.S. crude inventories have fallen more than 100 million barrels in 12 months to their lowest in three years. Benchmark crude oil futures for April delivery surged 90 cents or 1.4 percent at $63.01 a barrel on the New York Mercantile Exchange. April Brent crude declined 87 cents to settle at $66.63 a barrel on London's Intercontinental Exchange.


Indian rupee continued its downtrend for the second-straight day against the US dollar on Tuesday, on sustained bouts of month-end dollar demand from importers and banks. Also, weak domestic equity markets weighed on the rupee. Traders remained worried on private report stating that inflation is expected to trend higher and though RBI may keep policy rates on hold in 2018-19, there are also increasing chances of a rate hike. Investors also remained cautious ahead of domestic economic data including December quarter gross domestic product (GDP) and fiscal deficit, scheduled to be released on Wednesday. On the global front, Pound Sterling moved higher against the US Dollar on Tuesday, as investors sit on the sidelines ahead of testimony from Jerome Powell, the newly appointed chief of the US Federal Reserve Bank. Finally, the rupee ended at 64.89, 10 paise weaker from its previous close of 64.79 on Monday.


The FIIs as per Tuesday's data were net sellers in equity segment, while they were net buyers in debt segment, equity segment, the gross buying was of Rs 4282.43 crore against gross selling of Rs 5397.36 crore, while the debt segment, the gross purchase was of Rs 1044.58 crore with gross sales of Rs 965.86 crore. Besides, the hybrid segment, the gross buying was of Rs 0.05 crore against gross selling of Rs 0.48 crore.


The US markets closed sharply lower on Tuesday after new Fed Chairman Jerome Powell highlighted the strengthening economy during his congressional testimony, raising concerns over the possibility of four rate increases this year. Asian markets were trading in red on Wednesday, following a congressional testimony from the Federal Reserve's new chief. Indian markets edged slightly lower on Tuesday, with banks suffering heavy losses once again, after media reports suggested that the amount of fraud at PNB could be more than the current estimate. Today, the start of the session is likely to be on negative side on weak global cues and traders will be eyeing the dataprint for the December quarter GDP and fiscal deficit data that will be announced later in the day. Traders will also be eyeing manufacturing PMI to be released later in the day. Market participants may remain concern with report that the collection of Goods and Services Tax (GST) slipped marginally to Rs 86,318 crore in January, from Rs 86,703 crore in December. The total revenue received under GST for the month of January 2018 (received in January/February up to February 25, 2018) has been Rs 86,318 crore. However, investors may get some support with Finance Minister Arun Jaitley's statement that India's economy has the potential to achieve a growth rate of more than 7-8 per cent in view of policy changes accompanied by a supportive global environment. He also said India will continue to remain one of the fastest growing economies in the world. On GST, he said that a single rate for GST cannot work at the moment but the compliance will be made simpler. There will be buzz in Steel related stocks on World Steel Association's report that India's crude steel production grew 2.5 per cent to 9.02 million tonne (MT) in January 2018 compared to 8.81 MT in the year-ago month.


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