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NSE Intra-day chart (28 December 2016)
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Market Commentary 29 December 2016
Markets to make a soft-to-cautious start of F&O expiry session


Indian stocks markets showed a volte-face on the penultimate day of December series futures and options contract expiry, as what started on a promising note ended as a dismal show. The optimism in domestic markets petered out completely by the end of trade. Marketmen were optimistic for most part of the session as local sentiments remained upbeat with the report that India Inc raised Rs. 38,645 crore in November through private placement of corporate debt bonds, a surge of 57% from the year-ago level, for business expansion and propping up working capital requirements. Investors also got some confidence with NITI Aayog Vice Chairman Arvind Panagariya's statement, who expressing his support for the demonetisation of high-value currency, said that demonetisation was a move towards formal economy. He said it is the government's drive to promote digital transactions and a less cash economy so as to move from the informal to greater formalisation of the economic system. However, the sanguinity in local markets came under check as profit booking in some blue-chip counters like Reliance Industries, Tata Steel and Hero Motocorp put downside pressure on the frontline indices and dragged them even below the psychological 8,050 (Nifty) and 26,250 (Sensex) levels. Besides, continues selling by foreign portfolio investors (FPIs) and rupee's depreciation against dollar also played their role in pounding investors' morale. FPIs have pulled out close to $10 billion or a whooping Rs 65,000 to Rs 68,000 crore from country's debt and equity markets since November 8, triggering one of the largest sell-off in two months in India since 2013.  Traders also remained cautious with the reports that of the Rs 15.4 lakh crore worth of Rs 500 and Rs 1,000 notes that were scrapped as a resulted of PM Narendra Modi's November 8 declaration, as much as Rs 14 lakh crore has been deposited in banks. The value of scrapped currency exceeded the government's expectation. This also means that expectation that RBI will be able to give a substantial dividend to the government will be belied. Finally, the BSE Sensex declined by 2.76 points or 0.01% to 26210.68, while the CNX Nifty gained 2.76 points or 0.01% to 8,034.85. 


The US markets closed lower on Wednesday, slumping in a broad decline as the market's multi-week rally which has taken indexes to repeated records and the Dow within mere points of the 20,000 milestone stalled. All 11 of the S&P 500's primary sectors ended lower on the day, while the benchmark index itself suffered its biggest one-day point and percentage drop since October. Financials and materials, two of the best-performing industries of late, were among the hardest hit, with both down about 1%. The final week of the year is typically a quiet one for markets, with few expected news events - such as central-bank meetings or corporate earnings - to dictate market direction. On the economy front, stock-market investors have profited smartly from a postelection rally, but home buyers have fared worse after the surprise election of Donald Trump. The reason was the high mortgage rates. An index that measures pending home sales in the US fell 2.5% in November to the lowest level in nearly a year. The National Association of Realtors said the index dropped to 107.3 from 110 in the prior month. The Dow Jones Industrial Average dropped 111.36 points or 0.56 percent to 19,833.68, Nasdaq slipped 48.88 points or 0.89 percent to 5,438.56 and S&P 500 was down by 18.96 points or 0.84 percent to 2,249.92.


Crude oil futures moved further high on Wednesday touching their 17-Month highs ahead of U.S. inventories data. Traders were encouraged by a report from the National Association of Realtors which unexpectedly showed a sharp pullback in U.S. pending home sales in the month of November. The Energy Information Administration (EIA), a division of the Department of Energy, is coming out with its final report on the year on Thursday. Benchmark crude oil futures for February delivery gained $0.16 or 0.30 percent to $54.06 on the New York Mercantile Exchange. In London, Brent crude for January delivery ended higher by $0.11 or 0.22 percent at $56.20 on the ICE.


Indian rupee depreciated for the second consecutive session against the US dollar on Wednesday, due to fresh demand for the American currency from banks and importers. The domestic currency made a weak start and remained under pressure throughout the day due to the dollar strength against other currencies overseas. Traders also remained cautious with the report that FPIs have pulled out close to $10 billion or a whooping Rs 65,000 to Rs 68,000 crore from country's debt and equity markets since November 8, triggering one of the largest sell-off in two months in India since 2013. However, positive gains in equity market arrested some of the rupee's fall. On the global front, dollar edged up against the yen on Wednesday after strong US economic data reinforced expectations that the US Federal Reserve would be more hawkish in the year ahead. Finally, the rupee ended at 68.25, 19 paise weaker from its previous close of 68.06 on Tuesday.


The FIIs as per Wednesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 1645.31 crore against gross selling of Rs 2329.16 crore, while in the debt segment, the gross purchase was of Rs 697.73 crore with gross sales of Rs 686.04 crore.


The US markets declined in last session and the tech-heavy Nasdaq pulled back off yesterday's record closing high, mainly on profit taking as some traders looked to cash in on the recent strength in the markets. The Asian markets have followed the US trend and most of them have made a negative start as the crude oil prices slipped after touching their highest level in more than a year overnight. Japanese market was leading the decliners as the yen climbed against the dollar. The Indian markets came off the day's high in the final hours to snap the last session of trade on a flat note. Today, the start of the F&O series expiry day is likely to be a bit soft tailing the weakness in the global markets, however lots of volatility can be seen towards the expiry of December series as traders rollover their positions. Marketmen will be concerned with report that over 90 percent of junked notes are already deposited in banks, dimming the expectation that RBI will be able to give a substantial dividend to the government. Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) has approved the Road Connectivity Project for Left Wing Extremism (LWE) Affected Areas. There will be some action in banking stocks, as the Reserve Bank of India (RBI) in a circular to all lenders said that it has decided to provide 30 days, in addition to the 60 days of relief provided in November post-demonetisation in classifying loans as bad debts. Lenders can now wait for 90 more days before classifying a loan as a non-performing asset (NPA). There will be some buzz from the primary market too, as the stock exchange NSE filed draft red herring prospectus (DRHP) with market regulator Sebi for what could be the biggest initial public offering (IPO) in six years.


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