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Market Commentary 01 December 2020
Domestic markets to get flat-to-positive start tracking Asian peers

 

Indian equity benchmarks ended with marginal losses, after swinging between loses and gains through the day, as investors awaited official release of Gross Domestic Product (GDP) data for second quarter of the current financial year due later today. The benchmarks for most part of the day traded in a range bound manner. Investors' sentiment remain dented as SBI Research in its latest report said India's GDP likely contracted 10.7% in the second quarter, with a further recovery likely in the third quarter, citing improvements in economic indicators over October and November. A sharp depreciation in the rupee against the US dollar also weighed on sentiments. Indian rupee settled at 74.05 against the US dollar, registering a fall of 17 paise over its previous close. However, losses remain capped as some support came with Niti Aayog CEO Amitabh Kant's statement that digital infrastructure has become indispensable to the functioning of society and India can create $1 trillion of economic value using digital technology by 2025. He also said the coronavirus disease (covid-19) pandemic has provided an impetus to the ever-expanding digital infrastructure. Some support also came as the SBI Ecowrap in its latest report has stated that the Goods and Services Tax (GST) collections are likely to be 10-month high of Rs 1.08 lakh crore in November as compared to Rs 1.05 lakh crore in October 2020. Meanwhile, the government said it has extended the Emergency Credit Line Guarantee Scheme (ECLGS) to the health sector and 26 other sectors identified by the Kamath Committee. The National Credit Guarantee Trustee Company Limited (NCGTC) has issued the operational guidelines for implementation of ECLGS 2.0 scheme. Finally, the BSE Sensex fell 110.02 points or 0.25% to 44,149.72, while the CNX Nifty was down by 18.05 points or 0.14% to 12,968.95.

 

The US markets ended lower on Monday on profit taking following the strength seen in the markets over the past few sessions. Negative sentiment also generated in reaction to a report from the National Association of Realtors showing pending home sales in the US unexpectedly decreased in the month of October, according to a report released by the National Association of Realtors (NAR). NAR said its pending home sales index slid by 1.1 percent to 128.9 in October after tumbling by 2.0 percent to a revised 130.3 in September. The continued decline came as a surprise to economists, who had expected pending home sales to jump by 1.0 percent compared to the 2.2 percent slump originally reported for the previous month. Despite falling for two straight months, pending home sales in October were still up by 20.2 percent compared to the same month a year ago. Meanwhile, traders largely shrugged off the latest upbeat news regarding a potential coronavirus vaccine, with Moderna announcing that a phase 3 trial of its vaccine candidate indicates an efficacy of 94.1 percent. The biotechnology company said it plans to request an Emergency Use Authorization from the FDA and conditional approval from the European Medicines Agency.

 

Crude oil futures ended lower on Monday as traders looked ahead to the outcome of a meeting of OPEC and its allies. Meanwhile, the OPEC warned that the immense challenges caused by the coronavirus pandemic will likely persist in 2021. The OPEC president and Ageria's energy minister said the shock to the oil industry is massive and its severe impacts will likely reverberate in the years to come. However, crude oil futures (WTI futures) gained almost 20% in November, the strongest monthly returns since May, thanks to rising optimism about potential coronavirus vaccines. Crude oil futures for January dropped $0.19 or 0.4 percent to settle at $45.34 a barrel on the New York Mercantile Exchange. January Brent crude fell $0.64 or 1.33 percent to settle at $47.54 a barrel on London's Intercontinental Exchange.

 

Erasing previous sessions gaining momentum; Indian rupee ended lower against dollar on Friday, on account of sustained dollar demand from importers and banks. Investors' sentiment were dented amid SBI Research in its latest report has stated that India's GDP likely contracted 10.7% in the second quarter, with a further recovery likely in the third quarter, citing improvements in economic indicators over October and November. On the global front, dollar fell on Friday and was on track for a weekly loss against a basket of currencies, even as the equity market rally ran out of steam as sentiment was hurt by doubts about AstraZeneca's COVID-19 vaccine. Finally, the rupee ended at 74.05, 17 paise weaker from its previous close of 73.88 on Thursday.

 

The FIIs as per Friday's data were net buyer in equity segment, while net seller in debt segment, according to data released by the NSDL. In equity segment, the gross buying was of Rs 8946.75 crore against gross selling of Rs 5945.09 crore, while in the debt segment, the gross purchase was of Rs 1068.29 crore with gross sales of Rs 1513.31 crore.  Besides, in the hybrid segment, the gross buying was of Rs 33.15 crore against gross selling of Rs 54.69 crore.

 

The US markets ended lower on Monday as investors took profits at the end of a record-breaking month while still remaining upbeat about the prospect of a Covid-19 vaccine fuelling gains into next year. Asian markets are trading mostly in green on Tuesday as investors await the release of a private survey of China's manufacturing activity. Indian markets ended a tad lower on Friday as investors awaited the Q2 GDP print for directional cues. India's equity markets remain closed on Monday on account of Guru Nanak Jayanti. Today, the start of session is likely to be flat-to-positive tracking gains in Asian peers. Investors will first react to the September quarter GDP data. India's economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent and held out hopes for further improvement on consumer demand bouncing back. Traders will be taking encouragement as data from the Department for Promotion of Industry and Internal Trade (DPIIT) showed that FDI inflow rose 15 per cent during the April-September period to $30 billion (Rs 2.2 trillion) as compared to inflows of $26 billion during the same period last fiscal, with India being an attractive destination for foreign funds despite the pandemic. Some support will come with Fitch Solutions' statement that after a COVID-19 pandemic-led contraction in consumer spending in 2020, household spending will return to growth in 2021, expanding by as much as 6.6 percent. Besides, foreign portfolio investors (FPI) remained net buyers for the second consecutive month in November by pumping in a whopping Rs 62,951 crore in Indian markets. Meanwhile, India has reported a significant drop in the number of fresh Covid-19 cases, taking its tally to 9,463,254. The country's death toll stands at 137,659. However, traders may be cautious as the Union government's fiscal deficit further widened to Rs 9.53 lakh crore, which is nearly 120 per cent of the annual budget estimate, at the end of October of the current financial year. The deficit widened mainly on account of poor revenue realisation. Traders may take note of report that S&P Global Ratings has retained its forecast of 9 percent contraction in the Indian economy for the current fiscal, saying even though there are now upside risks to growth but it will wait for more signs that COVID infections have stabilised or fallen. Market participants will be looking ahead to the Manufacturing PMI data to be out later in the day. Auto industry will be in limelight as November sales data would start coming from today. Banking stocks will be in focus as Moody's Investors Service said the bank capital will moderately fall in emerging Asia over the next two years, with India seeing larger capital decline without further infusion. There will be some reaction in sugar industry stocks with report that the Centre's push for ethanol seems to have encouraged the sugar factories to increase cane crushing, as 149 mills in Maharashtra have produced 109 lakh quintal sugar within a fortnight of the beginning of the crushing season this year.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

12,968.95

12,910.40

13,031.40

BSE Sensex

44,149.72

43,961.00

44,372.87

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

NTPC

2,169.81

94.70

91.99

97.24

Tata Motors

1,259.26

180.35

175.39

184.59

Kotak Mahindra Bank

787.02

1,907.10

1,860.99

1,939.19

State Bank of India

543.56

244.25

242.11

246.31

ICICI Bank

483.91

473.35

469.91

478.16

 

  • M&M's wholly owned subsidiary -- Mahindra Holdings has agreed to sell its entire stake in MFCS and ADPL to TVS Automobile Solutions. 
  • Tata Steel has introduced a new coated product targeting MSMEs and emerging enterprises.  
  • NTPC's JV has awarded contract to OKAYA for EV charging stations. 
  • Dr. Reddy's Laboratories has entered into a definitive agreement with Glenmark Pharmaceuticals.
News Analysis