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NSE Intra-day chart (10 July 2020)
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Market Commentary 13 July 2020
Markets to start week on positive note on firm global cues

 

Indian stock markets ended Friday's volatile session in the negative territory, as relentless rise in Covid-19 cases both in India as well as on the global front weighed on investor sentiment. Sensex and Nifty settled below their crucial 36,600 and 10,800 levels, respectively. Key indices opened in red and stayed in the negative terrain for whole trading session, following the bearish cues from the other Asian markets. Traders remain concerned with a private report that India's GDP will contract by 3 percent in FY21 because of the coronavirus pandemic, assuming the economy is opened up fully from next month. It also said the RBI will monetise the fiscal deficit through purchase of government bonds of up to $95 billion through open market operations, and its revaluation reserves of $127 billion may also be used to recapitalise state-run banks. However, key gauges showed some signs of revival in the late afternoon session, taking support from Principal Economic Adviser Sanjeev Sanyal's statement that the government will undertake measures to boost demand and there is both monetary and fiscal headroom available. He stated that economic activity is steadily getting back on track. Sanyal indicated that the Reserve Bank of India (RBI) may cut interest rates further as a monetary policy tool to improve demand. Traders also took a note of report that Prime Minister Narendra Modi, in an effort to woo global investors, said that India has massive opportunities in various sectors such as defence, agriculture, and MSMEs. He emphasized on the opportunity that India provides, being one of the fastest-growing economies in the world. But, domestic bourses failed to carry the momentum and settled in red, as cautiousness remained in the markets ahead of Index of Industrial Production (IIP) data, which is scheduled to be announced post market hours. Finally, the BSE Sensex fell 143.36 points or 0.39% to 36,594.33, while the CNX Nifty was down by 45.40 points or 0.42% to 10,768.05.

 

The US markets ended considerably higher on Friday after Gilead Sciences (GILD) said remdesivir showed a sharp mortality risk drop when used to treat patients suffering of coronavirus. BioNTech's CEO also said the German biotechnology company's coronavirus vaccine candidate could be ready for approval by December. The upbeat treatment and vaccine news overshadowed the reports that the US saw a record number of new infections of COVID-19, rising by more than 63,000 to mark another single-day record, as hospitals in Texas, California and other states also saw rising hospitalizations from the illness. Total US cases of coronavirus climbed to more than 3.1 million and the death toll topped 133,000, according to data compiled by Johns Hopkins University. Separately, China said that it would impose reciprocal sanctions against US officials after the US imposed sanctions on individuals and institutions for human rights abuses of Uighurs, a mostly Muslim ethnic minority living in China's Xinjiang province. In economic data, the wholesale cost of US goods and services fell by 0.2% in June, reflecting depressed demand in retail and other major parts of the economy caused by the coronavirus pandemic. Looking forward, investors are bracing for corporate earnings reports, which will kick off in earnest next week, with the banking sector slated to deliver quarterly results that are likely to be disappointing.a

 

Crude oil futures ended notably higher on Friday taking support with an upward revision energy demand forecast by the International Energy Agency (IEA). The IEA says in its report that the worst of the oil market downturn from the coronavirus pandemic has passed. The agency has raised its demand forecast to 92.1 million barrels per day, up 400,000 barrels per day from its outlook last month, citing a smaller-than-expected second-quarter decline. A report from Baker Hughes said US oil rigs fell by four to 181 this week, their lowest since June 2009, while gas rigs dropped by one to 75, matching its record low hit a couple of weeks ago. Oil rigs count fell by 3 last week. Meanwhile, according to Baker Hughes' report, the total active US rig count fell by 5 to 258. Crude oil futures for August rose 93 cents or about 2.4 percent to settle at $40.55 a barrel on the New York Mercantile Exchange. September Brent crude added 89 cents or 2.1 percent to settle at $43.24 a barrel on London's Intercontinental Exchange.

 

Indian rupee depreciated against dollar on Friday, on account of sustained dollar demand from importers and banks. Sentiments impacted with a private report that India's GDP will contract by 3 percent in FY21 because of the coronavirus pandemic, assuming the economy is opened up fully from next month. It also said the RBI will monetise the fiscal deficit through purchase of government bonds of up to $95 billion through open market operations, and its revaluation reserves of $127 billion may also be used to recapitalise state-run banks. On the global front, dollar paused on Friday as concerns about a surge in coronavirus infections in the United States and elsewhere supported the safe haven Japanese yen, while risk-sensitive currencies lost ground. Finally, the rupee ended at 75.02, 21 paise weaker from its previous close of 74.99 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 7659.97 crore against gross selling of Rs 4282.66 crore, while in the debt segment, the gross purchase was of Rs 420.37 crore with gross sales of Rs 1939.56 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.70 crore against gross selling of Rs 16.84 crore.

 

The US markets ended higher on Friday amid reports about a potential coronavirus treatment increased hope for an economic recovery following the outbreak. Asian markets are trading mostly in green on Monday as investors wagered US earnings season would see most companies beat forecasts given expectations had been lowered so far by coronavirus lockdowns. Indian markets ended lower on Friday as a relentless surge in domestic coronavirus cases threatened to disrupt an economic recovery, with financials falling the most. Today, the start of new week is likely to be optimistic following positive cues from Asian peers and ahead of retail inflation data to be announced later in the day. Traders will be taking encouragement with Commerce and Industry Minister Piyush Goyal's statement that the government is looking at reforms in various sectors like foreign direct investment, mining, banking and capital market to promote economic activities in the country. Some support will come with agriculture ministry's statement that the government is on track to achieving the target of doubling farmers' income by 2024 and recent farm reforms, including setting up of a Rs 1 trillion agri-infra fund, are steps in that direction. Traders may take note of the International Monetary Fund's (IMF) statement that given the severity of the country's economic situation due to the COVID-19 pandemic, there is a scope for more near term fiscal support in India, especially for vulnerable households and SMEs. However, rising coronavirus cases may impact the investors' sentiment. India has recorded nearly 29,000 new cases in a day - the biggest spike in daily cases so far - taking its total number of Covid-19 cases to 879,466. There may be some cautiousness as Industry body FICCI in its Economic Outlook Survey has projected the country's annual median GDP growth for 2020-21 at (-) 4.5%. Besides, the government has held back the release of complete industrial production data for the second straight month in May in view of the impact of the coronavirus-induced lockdown. The Ministry of Statistics and Programme Implementation has released quick estimates of the Index of Industrial Production (IIP) which showed the index value at 88.4 in May against 53.6 in April, indicating a graded pickup in industrial activity. There will be some buzz in the telecom stocks as telecom regulator TRAI notified certain changes to the telecom interconnection rules, paving the way for easier interconnectivity between any two fixed-line networks and between fixed-line and national long distance networks. There will be some reaction in auto component sector stocks with ratings agency ICRA's statement that weak demand across domestic original equipment manufacturers, replacement market and exports could lead to a decline of 14-18 percent in revenues of auto component sector in 2020-21. Meanwhile, specialty chemicals company Rossari Biotech will launch its Rs 500-crore IPO today, ending a four-month lull in the primary market.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,768.05

10,714.23

10,820.63

BSE Sensex

36,594.33

36,414.00

36,761.78

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

State Bank of India

1,114.10

195.60

192.77

200.47

Tata Motors

646.95

107.60

105.80

109.00

ICICI Bank

278.66

360.35

356.83

366.03

IndusInd Bank

269.65

539.25

529.62

551.67

Axis Bank

256.76

439.60

433.92

448.37

 

  • Reliance Industries and bp have started their new Indian fuels and mobility joint venture, Reliance BP Mobility. 
  • Coal India has lined up Rs 10,000 crore as capital expenditure for the current financial year. 
  • ITC has incorporated a wholly owned subsidiary company namely ITC IndiVision on July 9, 2020. 
  • SBI is going to consider raising of AT1 and Tier 2 capital by way of issuance of Basel III compliant debt instrument in USD and/or INR during FY 21.
News Analysis