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NSE Intra-day chart (27 March 2019)
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Market Commentary 28 March 2019
Benchmarks likely to make a cautious start amid weak global cues


Indian markets wiped out all of their early gains and ended lower on Wednesday amid profit booking, with Sensex and Nifty closing the session below their psychological levels of 38,200 and 11,450, respectively. After a firm start of the day, key indices remained positive for the most part of the session with Vice President of India, M. Venkaiah Naidu's statement that tax reforms were slowly increasing India's tax base and shifting the social norms from one where it was alright to avoid taxes to one where the majority is willing to pay. Traders took support with a report that the RBI has received a good response to its dollar swap window on March 26, establishing the instrument as a credible liquidity tool and paving the way for more such auctions in the coming months. Banks offered $16.31 billion for the proposed swaps of up to $5 billion. The RBI accepted $5.02 billion at a cut-off premium of Rs 7.76 for three-year dollars - close to the rate at which the market was trading at. Some comfort also came with a private report indicating that although 2018 brought some cyclical challenges, India maintains top ranking in overall consumer sentiment, while Brazil has overtaken China to come second. However, in the last hours of the trade, the markets gave up their gains to settle in negative territory, amid weak cues from global markets. Domestic sentiments got hit after former RBI Governor Raghuram Rajan expressed doubts over Indian economy growing at 7% when not enough jobs were being created. The market participants overlooked Prime Minister Narendra Modi's announcement that India has emerged as a Space Power today; till now only US, Russia and China have achieved this; now India is the 4th country to achieve this feat. He added that, we have enough satellites that are contributing in various segments such as agriculture, disaster management, communication, weather, navigation etc. Moreover, India has successfully targeted a live satellite, anti-satellite weapon A-SAT, on a low Earth orbit. Mission Shakti took three minutes to complete. The PM added our aim is to maintain peace over war mongering. Finally, the BSE Sensex fell 100.53 points or 0.26% to 38,132.88, while the CNX Nifty was down by 38.20 points or 0.33% to 11,445.05.


The US markets ended lower on Wednesday on account of a notable drop by bond yields, which extended the downward trend seen over the past few sessions. The yield on the benchmark ten-year note ended the day at its lowest closing level since December of 2017. Bond yields have moved to the downside amid concerns about the economic outlook, with an inversion of the yield curve leading to worries about a potential recession. Eroding confidence in the economic outlook across the globe also compelled the Federal Reserve to lower domestic growth expectations for 2019 to 2.1% from 2.3% at its policy gathering earlier this month. On the economic front, largely reflecting a steep drop in the value of imports, the Commerce Department released a report showing the US trade deficit narrowed by much more than anticipated in the month of January. The Commerce Department said the trade deficit narrowed to $51.1 billion in January from a revised $59.9 billion in December. Street had expected the deficit to shrink to $57.0 billion from the $59.8 billion originally reported for the previous month. In the previous month, the trade deficit increased to its highest level since reaching $60.2 billion in October of 2008. The narrower than expected deficit came as the value of imports tumbled by 2.6 percent to $258.5 billion in January after jumping by 2.1 percent to $265.3 billion in December. The value of crude oil imports showed a notable decrease along with imports of capital goods such as computer accessories, semiconductors, and civilian aircraft. Dow Jones Industrial Average dropped 32.14 points or 0.13 percent to 25625.59, Nasdaq declined 48.15 points or 0.63 percent to 7643.38 and S&P 500 was down by 13.09 points or 0.46 percent to 2805.37.


Crude oil futures ended lower on Wednesday after a US government report revealed a weekly increase in domestic crude supplies, defying market expectations for a third straight weekly decline. The Energy Information Administration (EIA) reported that US crude supplies unexpectedly rose by 2.8 million barrels for the week ended March 22. Analysts polled by S&P Global Platts expected a fall of 2.2 million barrels, following two straight weeks of declines. The American Petroleum Institute on Tuesday had reported an increase of 1.9 million barrels. Benchmark crude oil futures for May dropped 53 cents or 0.9 percent to settle at $59.41 a barrel on the New York Mercantile Exchange. May Brent crude declined 14 cents or 0.2 percent to settle at $67.83 a barrel on London's Intercontinental Exchange.


Indian rupee ended marginally lower against US dollar on Wednesday on account of fresh demand for the American currency from banks and importers. Traders remained wary with former RBI Governor Raghuram Rajan expressing doubts over Indian economy growing at 7% when not enough jobs were being created. He also said the current cloud over the GDP numbers must be cleared by appointing an impartial body to look at the data. Late hour selling in the domestic equity markets too weighed on the rupee sentiment. However, losses were limited as traders took some support with report that the RBI has received a good response to its dollar swap window on March 26, establishing the instrument as a credible liquidity tool and paving the way for more such auctions in the coming months. On the global front, pound hovered below a recent nine-month high on Wednesday before a series of indicative votes in the British parliament on how to break the Brexit impasse. Finally, the rupee ended at 68.88, 2 paise weaker from its previous close of 68.86 on Tuesday.


The FIIs as per Wednesday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 5028.39 crore against gross selling of Rs 4138.61 crore, while in the debt segment, the gross purchase was of Rs 1284.16 crore with gross sales of Rs 2131.35 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.85 crore against gross selling of Rs 0.34 crore.


The US markets ended Wednesday's choppy session lower with lingering worries over the economic growth outlook. Asian markets are trading mostly in red on Thursday following an overnight slip on Wall Street after the closely-watched 10-year Treasury yield touched its lowest in more than a year. Late hour selling mainly played a spoil sport for Indian equity markets to settle near intraday low levels on Wednesday on account of heavy profit booking and lackluster global cues. Today, the start of the F&O series expiry session is likely to be a bit cautious tailing the weak global cues amid growth concerns. There will be some cautiousness with report that there is a shortfall in income tax collections. Progress in tax collection has been reviewed as against the targeted Rs 12 lakh crore. Only 85.1% of the targeted or Rs 10.21 lakh crore has been collected as of March 23. A head-wise analysis indicates negative growth in regular collection at 6.9% as compare a negative 5.2% last week. This is alarming and needs immediate attention. Traders will also be reacting to the finance ministry's statement that currency in circulation as percentage of Gross Domestic product (GDP) declined by over 1 percentage points to 10.48% in the two years after demonetization. The government had demonetised currency notes of 500 and 1000 denomination on November 8, 2016, to check black money. However, some support may come with report that India's monsoon, crucial for Asia's third largest economy, is likely to be a robust and healthy one this year provided there isn't a surprise El Nino phenomenon. Monsoon rains, the lifeblood for India's farm-dependent $2.6 trillion economy, arrive on the southern tip of Kerala state around June 1. Traders may take note of a report that the Reserve Bank of India (RBI) is likely to cut repo rate by 25 basis points in the April policy due to weak economic activity. The monetary policy committee is scheduled to meet from April 2 to 4. There will be some reaction in hotel industry stocks with ICRA's report that the domestic hotel industry is expected to register a top line growth of 10-11% in 2019 than the earlier expectation of 8.5%. According to the report, the demand for room is expected to continue to grow by about 8-9% year-on-year over the medium term, led by increasing domestic travel, buoyant meetings, incentives, conferencing and exhibitions (MICE) activity and higher FTAs, despite immediate headwinds from global geopolitical concerns and increasing local airfare.


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