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Market Commentary 29 July 2019
Benchmarks to make a weak start amid negative trend in Asian peers


Key Indian indices snapped 6-day losing streak on Friday and ended the session in green terrain. After a cautious start, markets traded volatile, amid reports that despite heavy buying by foreign investors in the last month of 2018-19 (FY19), foreign portfolio investors remained net sellers of $5.5 billion in the market. An announcement of increase in surcharge on the super-rich in the Union Budget FY20 has weighed on portfolio investors and witnessed outflows, especially in the equity segment. Sentiments remained muted, amid a private report stating that India Inc's deal activity in the first six months of this year encompassing both M&A and private equity transactions, stood at $32.1 billion, down 57 per cent over last year. Despite volatility, key indices managed to remain in green terrain for the most part of the session, as rating agency CRISIL in its latest report said that the Reserve Bank's newly introduced guidelines curbing working capital limits may lead to better financial discipline. Some support also came with Niti Aayog CEO Amitabh Kant's statement that India was pursuing a policy of import substitution so far, and in future, the country's policy will essentially focus on export-led growth. He said India has huge potential to become a global manufacturing hub for electronics products. Some relief also came with the Employees' State Insurance Corporation (ESIC) payroll data report that around 12.66 lakh jobs were created in May, a tad higher than 11.15 lakh jobs in April this year. Finally, the BSE Sensex gained 51.81 points or 0.14% to 37,882.79, while the CNX Nifty was up by 32.15 points or 0.29% to 11,284.30.


The US markets settled in green on Friday as investors welcomed strong corporate earnings, government approval of the T-Mobile and Sprint merger, and better-than-expected economic growth. Alphabet, Twitter reported better than expected second quarter earnings. The US Justice Department officially approved the merger between T-Mobile US Inc and Sprint Corp provided the wireless carriers divest assets to Dish Network Corp. Besides, US economic growth slowed in the second quarter but still exceeded street estimates, according to a report released by the Commerce Department. The Commerce Department said real gross domestic product climbed by 2.1 percent in the second quarter following the 3.1 percent jump in the first quarter. Street had expected the pace of GDP growth to slow to 1.9 percent. The stronger than expected GDP growth was partly due to a substantial acceleration in the pace of growth in consumer spending, which soared by 4.3 percent in the second quarter after rising by 1.1 percent in the first quarter. A 7.9 percent spike in federal government spending also contributed to the GDP growth along with a 3.2 percent increase in state and local government spending. Meanwhile, the Commerce Department said negative contributions from private inventory investment, exports, non-residential fixed investment and residential fixed investment limited the upside. The report also said imports, which are a subtraction in the calculation of GDP, inched up by 0.1 percent in the second quarter after tumbling by 1.5 percent in the first quarter. Dow Jones Industrial Average gained 51.47 points or 0.19 percent to 27192.45, Nasdaq surged 91.67 points or 1.11 percent to 8330.21 and S&P 500 was up by 22.19 points or 0.74 percent to 3025.86.


Crude oil futures ended marginally higher on Friday as traders continued to worry over prospects for demand growth. Oil prices saw little movement after oil-field services firm Baker Hughes reported the number of US oil rigs fell by three this week to 776. A private report stated that Oil market fundamentals are at an inflection point, with rising US output moving to offset cuts by members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies as worries mount over global economic growth. Benchmark crude oil futures for September gained 18 cents or 0.3 percent to settle at $56.20 a barrel on the New York Mercantile Exchange. October Brent added 11 cents or 0.2 percent to settle at $63.37 a barrel on London's Intercontinental Exchange.


Indian rupee ended stronger against dollar on Friday, due to increased selling of the American currency by exporters and banks. Local investors cheered with Niti Aayog CEO Amitabh Kant's statement that India was pursuing a policy of import substitution so far, and in future, the country's policy will essentially focus on export-led growth. He said India has huge potential to become a global manufacturing hub for electronics products. Some relief also came with the Employees' State Insurance Corporation (ESIC) payroll data report that around 12.66 lakh jobs were created in May, a tad higher than 11.15 lakh jobs in April this year. However, dollar's strength against major global currencies overseas restricted the local unit's further up move. On the global front, dollar held near two-month highs on Friday and looked set for a second straight weekly gain, as the market awaited U.S. gross domestic product numbers for the second quarter. Finally, the rupee ended at 68.89, 15 paise stronger from its previous close of 69.04 on Thursday.


The FIIs as per Friday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 6952.03 crore against gross selling of Rs 6416.93 crore while in the debt segment, the gross purchase was of Rs 1333.39 crore with gross sales of Rs 1300.38 crore. Besides, in the hybrid segment, the gross buying was of Rs 8.41 crore against gross selling of Rs 5.64 crore.


The US markets ended higher on Friday on the back of strong earnings and better-than-expected GDP data. Asian markets are trading in red on Monday amid US-China talks to resume in Beijing later this week amid low expectations for a major breakthrough. Indian markets snapped six-day losing streak and ended higher on Friday with Sensex and Nifty recapturing their 37,800 and 11,250 levels, respectively, led by gains in auto and banking stocks. Today, the markets are likely to make a weak start following negative trend in the Asian peers. Traders will be concerned with the latest depositories data showing that reversing their five-month buying trend, overseas investors have pressed the exit button in July and pulled out a net Rs 3,758 crore from the Indian capital markets on account of multiple headwinds, including the super-rich tax announced in Budget 2019-20. Foreign portfolio investors (FPIs) pulled out a net sum of Rs 14,382.59 from equities during July 1-26, but invested Rs 10,624.15 crore in the debt segment, taking the total net outflow to Rs 3,758.44 crore. There will be some cautiousness with a report that midway into earnings season, it is clear that India Inc's P&L account remains under pressure. Revenue growth is so sluggish that even a modest increase in costs has not helped companies protect their margins. Traders may also take note of report that Finance Minister Nirmala Sitharaman has ruled out reconsidering a plan to issue foreign currency overseas sovereign bonds, despite warnings of long-term risk for the economy. However, some respite may come later in the day as India's chief economic advisor to the Union finance minister Krishnamurthy Subramanian exuded confidence in the economy swelling to a $5-trillion giant by 2025, saying the high target is definitely achievable. Meanwhile, the Insolvency and Bankruptcy Board of India (IBBI) has amended norms pertaining to insolvency resolution process for corporate persons and liquidation process. Moreover, markets watchdog SEBI has eased the conditions for exchanges to provide incentives under liquidity enhancement schemes (LES) in the first five years of operation. There will be some buzz in the auto stocks as the high-powered GST Council decided to reduce the tax rate on electric vehicles (EVs) to 5% from the existing 12%, a move aimed at accelerating the adoption of eco-friendly mobility solutions. The new Goods and Services Tax (GST) rate on EVs will be effective from August 01. Besides, mobile marketing firm Affle India will open its initial public offering for subscription on July 29. The company is aimed to raise Rs 456.52 crore at the lower end of the price band and Rs 459 crore at the higher end of the price band of Rs 740-745 per share. There will be lots of important earnings announcements too, to keep the markets in action.


Support and Resistance: NSE (Nifty) and BSE (Sensex)



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Nifty Top volumes




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  • SBI is all set to revise export transactions related service charges to provide clear visibility of cost structures to traders. 
  • Tata Steel has subscribed to 2.58 crore rights equity shares of Tata Sponge Iron at an issue price of Rs 500 per share totaling to Rs 1,292.2 crore. 
  • Yes Bank has acquired 32,750,139 equity shares having nominal value of Rs 5 per share, constituting 18.55% of the post-issue paid-up share capital of Cox & Kings. 
  • M&M's utility vehicle Bolero Power plus model has received BS-VI readiness certification from the International Centre for Automotive Technology.
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