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NSE Intra-day chart (28 November 2016)
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Market Commentary 29 November 2016
Markets to make a cautious start tailing mixed cues


Indian equity benchmarks ended the choppy day of trade slightly in green on Monday, with frontline gauges swinging between green and red for most part of the day. Markets started the session in negative terrain as traders reacted negatively to the Reserve Bank of India's (RBI) surprise move during the weekend, ordering banks to transfer 100% of their cash under the central bank's cash reserve ratio (CRR) from deposits generated between September 16 and November 11. Though, RBI has said that it will review its decision asking banks to deposit their extra cash with it once the government issues an adequate quantum of market stabilisation scheme bonds to soak up liquidity. Markets took U-turn and entered into green terrain in late morning session, as traders got some encouragement with Fitch Ratings' latest statement that it expects India's GDP growth trend higher than China's in the medium term despite demonetization. It added that in India it expects GDP growth to accelerate in FY2018 on the back of reform implementation, monetary easing of the past year and infrastructure spending. Some support also came after RBI's Governor Urjit Patel said that all necessary actions are being taken to ‘ease the genuine pain of citizens' who are honest and who have been hurt. Liquidity in the banking system has increased and the intent is to normalise things as soon as possible. Currency is available and banks are working in a mission mode to take them to branches and ATMs, expressed the RBI Governor. On the global front, European markets were trading lower on Monday, while most of the Asian counters ended in green. Back home, banking counters remained under pressure after RBI on Saturday asked banks to maintain a temporary incremental cash reserve ratio (CRR) of 100 per cent to absorb excess liquidity from the system. However, metal and mining stocks such as Jindal Steel, Vedanta, JSW Steel, and Hindustan Zinc rallied during the trade, as copper prices rose in global commodity markets. Telecom stocks edged higher after the government's decision to allow old Rs 500 notes to be used for pre-paid mobile recharges. Finally, the BSE Sensex rose 33.83 points or 0.13% to 26350.17, while the CNX Nifty gained 12.60 points or 0.16% to 8,126.90.


The US markets closed lower on Monday, as investors found few reasons to keep pushing shares higher following an extended rally that took major indexes to a string of records and lifted major indexes for three straight weeks. Stocks were left overbought as investors have placed faith in promises of stronger growth and less regulation under a Trump presidency. Investors expect that the president-elect will advocate for policies - such as infrastructure spending, massive corporate tax cuts and environmental and financial deregulation - that could spur economic growth. In its twice-yearly Economic Outlook, the Organization for Economic Cooperation and Development (OECD) estimated global growth would accelerate from 2.9 percent this year to 3.3 percent in 2017 and reach 3.6 percent in 2018. The OECD stated that global growth will pick up faster than previously expected in the coming months as the Trump administration's planned tax cuts and public spending fire up the US economy, revising up its forecasts. The Paris-based organization was slightly more optimistic about the US outlook, with a forecast for growth next year of 2.3 percent, up from 2.1 percent in its last set of estimates dating from September. The Dow Jones Industrial Average lost 54.24 points or 0.28 percent to 19,097.90, Nasdaq was down 30.11 points or 0.56 percent to 5,368.81, while S&P 500 dropped 11.63 points or 0.53 percent to 2,201.72.


Crude oil futures bounced back on Monday after moving sharply lower over the course of the previous session, on fresh hopes for OPEC deal after Iraq's oil minister said, he is optimistic OPEC members will reach an agreement on cutting production at a meeting on Wednesday. OPEC members are making a last-ditch effort to save the deal. Benchmark crude oil futures for January delivery surged by $1.02 or 2.2 percent to $47.08 on the New York Mercantile Exchange. In London, Brent crude for January delivery ended higher by $1.01 or 2.1 percent at $48.24 on the ICE.


Indian rupee ended considerably weaker against the US dollar on Monday due to month-end demand for the American currency from importers. Sentiments also remained dampened after the Reserve Bank of India (RBI) on Saturday introduced an incremental CRR of 100% for the fortnight to absorb the surge in liquidity in banking system following demonetization of high value notes. The CRR hike will reduce the market liquidity considerably and lowers the chances of any rate cut by the RBI in its upcoming policy review. Besides, weak domestic equity market also weighed on the rupee but the dollar weakened against some currencies overseas capped the fall. On the global front, dollar fell sharply against the yen as renewed uncertainty over the direction of oil production amplified a wave of profit-taking from a post-U.S. election surge. Finally, the rupee ended at 68.76, 30 paise weaker from its previous close of 68.46 on Friday.


The FIIs as per Monday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3770.32 crore against gross sell of Rs 4231.61 crore, while in the debt segment, the gross purchase was of Rs 2687.95 crore with gross sales of Rs 3175.29 crore.


The US markets ended lower in lasts session on profit taking, partly offsetting the strong gains posted last week. Trepidation ahead of a key OPEC meeting later this week also weighed on the markets. The Asian markets have made a mixed start with some of the indices trading marginally in red on concerns OPEC won't get a deal done. The Indian markets despite a choppy session managed a modestly positive close in last session, as banking stocks pared earlier losses and sliding oil prices pushed shares of state-run oil companies. Today, the start is likely to be cautious amid mostly somber global cues. There will be some buzz in the markets with Finance Minister Arun Jaitley's introduction of a Taxation Laws (Second Amendment) Bill in Lok Sabha, which proposes a new voluntary disclosure and investment scheme, named Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016. PMGKY will be notified after the Bill is passed by Parliament and receives Presidential Assent. Once the amendments are approved by Parliament, there would be a penalty of 30 per cent of unaccounted income, if admitted and taxes are paid. This would take the total incidence of tax and penalty to 60 per cent. Meanwhile Centre has decided to set up a sub-committee of Chief Ministers to review the ground- level situation following its decision to demonetise high value currency and suggest possible ways to ease problems. The IT stocks will continue to remain in focus on reports that Indian IT firms have sped up acquisitions in the US and are recruiting more heavily from college campuses there, anticipating a more protectionist US technology visa programme under a Donald Trump administration. The power sector will be reacting to an ICRA report that the government's revised emission norms for thermal power projects, which were notified in December last year, are expected to cut emissions from these big emitters by as much as 40 per cent. The telecom sector too will be in action with Reliance Jio Infocomm filing a complaint against some telecom operators with fair trade regulator CCI alleging violation of competition norms.


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  • Tata Steel has signed a Letter of Intent with Liberty House Group to enter into exclusive negotiations for the potential sale of its UK Speciality Steels business.
  • State Bank of India has entered into partnership with Ola Cabs in order to ease cash crunch post demonetisation.
  • Bharti Airtel's wholly owned subsidiary - Airtel Payments Bank has opened over 10,000 savings accounts with it within two days of going live with a pilot project in Rajasthan.
  • Mahindra & Mahindra is working out a plan to help its tractor and commercial vehicle customers hit by the Centre's move to demonetize high-value notes.
  • Dr Reddy's Laboratories is acquiring non-banking financial company Imperial Credit for Rs 36 crore.
News Analysis