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NSE Intra-day chart (30 August 2017)
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Market Commentary 31 August 2017
Markets to make a cautious start of F&O expiry session

Wednesday turned out to be a fabulous day of trade for the Indian equity benchmarks, with frontline gauges garnering gains of around a percent on account of increased buying in select stocks coupled with covering-up of pending short-positions ahead of August month F&O expiry tomorrow. Market participants accumulated quality stocks at reasonable valuations after yesterday's drubbing. Sentiments remained optimistic since beginning, with key gauges making a gap-up opening and trading jubilantly through the session after concerns about North Korea's firing of a missile over Japan ebbed. Traders took some encouragement with Finance Minister Arun Jaitley's statement that goods and services tax (GST) collections have exceeded estimates in the first month of the landmark levy's rollout, despite a significant number of assessees not having filed returns yet. Finance Minister said that GST mopup in July pegged at Rs 92,283 crore and could rise further. Some support also came with NITI Aayog's statement that enhancing access to low-cost capital to businesses could serve as an important vehicle for improving the business environment, especially in poor states like Bihar. Markets extended rally in afternoon deals with Finance Ministry expressing its confidence of meeting the 3.2% fiscal deficit target for the financial year 2017-18, despite the low dividends from the Reserve Bank of India (RBI) and muted proceeds from stake sales in public sector enterprises till now. However, markets trimmed some of their gains in last leg of trade to end off day's highs, as anxiety spread among the investors with ICRA's latest report stating that the profitability of India Inc got hurt with the margins contracting by as much as 1.80% to 15.7% on a year-on-year basis on account of introduction of new tax regime. Some concerns also came with a private report that India's economic growth is likely to remain soft and the GDP is expected to grow by 6 per cent in April-June, down from 6.1 per cent in the preceding quarter. Finally, the BSE Sensex soared 258.07 points or 0.82% to 31,646.46, while the CNX Nifty was up by 88.35 points or 0.90% to 9,884.40.


The US markets closed higher on Wednesday, with the benchmark S&P 500 posting gains for a fourth straight session after a pair of strong economic reports. Wednesday's advance was marked by bouts of volatility triggered by ongoing tensions between the US and North Korea. Federal Reserve Governor Jerome Powell said that the Federal Reserve will continue to expect much more from ever before from directors of large banks. Powell reminded that during the financial crisis, large banks incurred massive losses from esoteric products that were not even on the radar of bank boards. He said the Fed would work with bank directors who feel buried under paper from regulations put in place post-crisis, but said the central bank would not back away from requiring that bank boards be strong and effective. On the economy front, the US economic rebound in the second quarter was stronger than initially reported, as a lift to consumer spending and business investment led to the strongest growth in more than two years. Gross domestic product rose at 3% rate from April to June, up from an initial 2.6% reading. The economy picked up from a 1.2% rate in the first quarter. A slow first quarter followed by an improved second quarter also occurred in two of the past three years. The last time the US economy had two quarters above 3% was in 2014. The Dow Jones Industrial Average added 27.06 points or 0.12 percent to 21,892.43, the Nasdaq gained 66.42 points or 1.05 percent to 6,368.31, and the S&P 500 edged higher by 11.29 points or 0.46 percent to 2,457.59.


Crude oil futures continued its weakness on Wednesday, as flooding from Tropical Storm Harvey continued to batter US refinery capacity, offsetting data showing U.S. supplies of crude oil fell for a ninth-straight week. Benchmark crude oil futures for October delivery ended down by $0.48 or 1percent to $45.96 on the New York Mercantile Exchange. In London, Brent crude for October delivery ended lower by 1.72 percent at $50.77 a barrel on the ICE.


Indian rupee after making a positive start managed a modestly positive close on Wednesday, recovering some ground from its last session fall, on back of selling of American currency by banks and exporters. The domestic currency got the support of dollar's weakness against major world currencies overseas. A strong domestic equity market too propped up the rupee sentiment in early trade, as the local markets made a strong come back from last session fall, however the rupee pared most of the gains in final hours on increased month end dollar demand from importers. On the global front, the dollar recovered from a four-month low against the Japanese yen on Wednesday as investors' worries over North Korea's latest missile test eased, boosting appetite for riskier assets. Finally, the rupee ended at 64.01, 1 paise stronger from its previous close of 64.02 on Tuesday.


The FIIs as per Wednesday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 4878.97 crore against gross selling of Rs 4660.39 crore, while in the debt segment, the gross purchase was of Rs 1510.48 crore with gross sales of Rs 605.67 crore.


The US markets extended their gains in the last session, some upbeat U.S. economic data, including a report showing a jump in private sector employment supported the markets. Though the trading activity was somewhat subdued, however, as traders seemed reluctant to make significant moves. The Asian markets have made a mixed start and some indices are down by over half a percent. Japanese market was up despite its industrial production slowing in July from June, as continued strong exports and a cheap yen indicated that the phase is temporary. The Indian markets made a smart come back in the last session on easing geopolitical tensions, and the major averages recovered most of their losses of previous session. Today, the start of the F&O series expiry session is likely to be flat-to-cautious, as tensions between the US and North Korea seemed to escalate. Trade may turn choppy in the latter trade as the traders will be rolling over their positions to the next series. There will be some concern with assessment of RBI in its annual report that fiscal consolidation may come under threat at the central and state levels due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix. Traders will be getting some support with Finance Minister Arun Jaitley's statement that the Goods and Services Tax (GST) is bound to impact the direct tax collection as well due to the increased detection technology and greater compliance. The Finance Minister also said that even before GST was rolled out, the impact of demonetisation has expanded the number of assessees under the personal income tax. The auto stocks will keep buzzing with the Union Cabinet approval of promulgation of an Ordinance that would allow the GST Council to hike the maximum rate of compensation cess on large and luxury vehicles to 25 per cent from the current cap of 15 per cent.


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