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NSE Intra-day chart (28 December 2018)
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Market Commentary 31 December 2018
Markets to get an optimistic start on last trading session of 2018


Key Indian equity benchmarks gathered pace to close the session on strong note, on the first day of January F&O series. The start of the Friday's session remained jubilant, with Ministry of Commerce & Industry's report showing that the growth of manufacturing sector as measured by the Index of Industrial Production (IIP) with base year 2011-12, has been consistently increasing over the past three years and the current year. As per data report, manufacturing sector grew at the rate of 5.6% during April-October period (Provisional), while in 2017-18, the growth rate was 4.6% as against 4.4% in 2016-17. Traders took encouragement with a private report stating that India has been getting more foreign investment than China. In 2018, India saw more than $38 billion of inbound deals compared with China's $32 billion, buoyed by stable fundamentals. Domestic sentiments also remained firm with the new foreign direct investment (FDI) policy in the e-commerce sector may not impact jobs immediately. The new FDI policy released by the government on December 26 aims to protect the interests of local businessmen, who had accused the online marketplaces of butchering their revenue. The markets remained in the grip of the bulls throughout the session, tracking positive global cues. The trade remained positive amid reports that under attack for the agrarian crisis, the government is contemplating several incentives, including a big financial package, to woo farmers ahead of the 2019 Lok Sabha elections. The government is looking at a sort of income support scheme for farmers, along with tweaking some existing programmes, to make them more beneficial and improve their acceptability among growers. The markets participants paid no heed towards report that India's fiscal deficit exceeded to Rs 7.17 lakh crore and touched 114.8% of the Budget Estimate (BE) of Rs 6.24 lakh crore at the end of November on account of lower revenue collections. At the end of November 2017, it was 112% of the BE. Besides, the government has budgeted to cut the fiscal deficit to 3.3% of Gross Domestic Product (GDP) in 2018-19, from 3.53% in the previous financial year. Investors even overlooked the Reserve Bank of India's report that Indian companies borrowed $1.99 billion from overseas markets in the month of November 2018 through external commercial borrowing (ECB), 34% lower than a year ago. Finally, the BSE Sensex surged by 269.44 points or 0.75% to 36,076.72, while the CNX Nifty was up by 80.10 points or 0.74% to 10,859.90.


The US markets ended mostly in red on Friday as traders seemed to take a breather following the substantial volatility seen over the past several sessions. A still-unresolved government shutdown remains as an overhang for markets, as do concerns about the economy and the next round of company earnings. Traders reluctant to make any further move ahead of the New Year's Day holiday on January 01, 2019. However, Nasdaq Composite managed to eke out slender gains. On the economic front, the National Association of Realtors (NAR) released a report showing a continued drop in pending home sales in the month of November. NAR said its pending home sales index fell by 0.7 percent to 101.4 in November after plunging by 2.6 percent to 102.1 in October. The continued decline in pending home sales matched traders' estimates. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. While pending contracts have fallen to their lowest level since 2014, NAR chief economist Lawrence Yun said there is no reason to be overly concerned and predicts solid growth potential for the long-term. A separate report from MNI Indicators showed growth in Chicago-area business activity pulled back in December after accelerating sharply in November, although the pace of growth slowed by much less than anticipated. MNI Indicators said its Chicago business barometer dipped to 65.4 in December after spiking to 66.4 in November, with a reading above 50 still indicating growth in regional business activity. Street had expected the barometer to drop to 62.0. Dow Jones Industrial Average declined 76.42 points or 0.33 percent to 23,062.40 and S&P 500 slipped 3.09 points or 0.12 percent to 2,485.74, while Nasdaq was up by 5.03 points or 0.08 percent to 6,584.52.


Crude oil futures settled higher on Friday after data from US Energy Information Administration (EIA) showed a much less than expected decline in US crude stockpiles last week. The EIA's weekly report showed crude inventories in US decreased by 0.046 million barrels in the week ended December 21, much less than expected. In the previous week, oil stockpiles saw a drop of 0.5 million barrels. Meanwhile, gasoline inventories rose by 3.003 million barrels last week, compared to expectations of a marginal increase of 0.03 million barrels. Benchmark crude oil futures for February surged 72 cents or 1.6 percent to settle $45.33 a barrel on the New York Mercantile Exchange. February Brent crude gained 4 cents or less than 0.1 percent to settle at $52.20 a barrel on London's Intercontinental Exchange.


Reversing previous session's losses, Indian rupee staged a smart recovery against dollar on Friday, aided by foreign fund inflows amid a weak dollar globally and sharp fall in crude oil prices. Traders took encouragement with a private report stating that India has been getting more foreign investment than China. In 2018, India saw more than $38 billion of inbound deals compared with China's $32 billion, buoyed by stable fundamentals. The markets participants paid no heed towards report that India's fiscal deficit exceeded to Rs 7.17 lakh crore and touched 114.8% of the Budget Estimate (BE) of Rs 6.24 lakh crore at the end of November on account of lower revenue collections. At the end of November 2017, it was 112% of the BE. On the global front, Japanese yen gained half a per cent against the dollar on Friday as investors cut back positions in risky assets after a volatile week in global stock markets and as concerns grow about a trade dispute between United States and China. Finally, the rupee ended at 69.95, 40 paise stronger from its previous close of 70.35 on Thursday.


The FIIs as per Friday'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 5601.98 crore against gross selling of Rs 4024.60 crore, while in the debt segment, the gross purchase was of Rs 323.13 crore with gross sales of Rs 487.29 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.38 crore against gross selling of Rs 0.25 crore.


The US markets ended mostly lower on Friday as a still-unresolved government shutdown remains as an overhang for markets. Asian markets were trading in green on Monday as hints of progress on the Sino-US trade standoff provided a rare glimmer of optimism in what has been a rough year-end for equities globally. Indian markets extended their gains for third straight session and ended higher on Friday tracking positive global cues and on reports about government's decision to infuse capital in seven public sector banks. Today, the markets are likely to make optimistic start of the final day of 2018, tracking firm trade in Asian peers amid easing of US-China trade tensions. Traders will be getting encouragement with the Confederation of Indian Industry's (CII) statement that the country is expected to witness strong economic growth in 2019, after it has emerged as the fastest growing major world economy this year despite growing global vulnerabilities. It added that better demand conditions, settled GST implementation, capacity expansion from growing investments in infrastructure, continuing positive effects of reform policies and improved credit offtake especially in the services sector at 24% will sustain the robust GDP growth of 7.5% in 2019. There will be some support with the government's statement that the net direct tax collection till December 20 this fiscal amounted to Rs 7.36 lakh crore, a growth of 14% over the same period a year ago. This is 64% of the Budget estimate for direct tax collection in the current fiscal. Traders may take note of a report that in a bid to address farmers' distress ahead of 2019 general elections, the government is considering waiving interest on crop loans for farmers who pay on time, costing an additional Rs 15,000 crore to the exchequer. However, there may be some cautiousness with the Reserve Bank of India (RBI) warning that with high bad loans and inadequate provisioning to cover the same, any relaxation in the regulatory capital requirement or risk-weights could be detrimental to banks in particular and the economy in general. There will be some buzz in the banking sector stocks with the Reserve Bank of India's (RBI) data showing that banks have seen a significant improvement in recovery of stressed assets helped by the Insolvency and Bankruptcy Code (IBC) and amendments in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, during FY18. In the fiscal ended March 2018, banks recovered Rs 404 billion worth of bad loans as against Rs 385 billion recovered in FY17. Also, there will be some reaction in jewellery related stocks with ICRA's report that gold jewellery demand is likely to grow 6-7% over the medium to long-term aided by evolving lifestyle, growing disposable income and the increasing penetration of organised sector.


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