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NSE Intra-day chart (25 August 2020)
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Market Commentary 26 August 2020
Markets to open slightly in green on Wednesday

 

Indian equity benchmarks erased most of their intraday gains but somehow managed to end the session marginally in green on Tuesday, tracking positive global markets amid enthusiasm on the recovery from Covid-19. Benchmarks made positive start, as traders got encouragement with a private report that the phase 2 human clinical trial of the Oxford COVID-19 vaccine candidate by Pune-based Serum Institute of India (SII) is set to begin from Tuesday. The observer-blind, randomised controlled study to determine the safety and immunogenicity of Covishield on healthy Indian adults will begin at Bharati Vidyapeeth Medical College and Hospital in Pune. Some optimism also came as ratings agency Crisil said it expects India's retail food inflation, measured through the Consumer Price Index (CPI), to ease in the second half of this financial year owing to the effect of high base of previous year coupled with a bumper rabi harvest and good prospect of kharif harvest. However, volatility hit the bourses in late morning trade as key indices oscillated between the positive and negative territory, as traders got anxious with a report by State Bank of India (SBI) stating that states are likely to face uncovered losses of up to Rs 3.1 lakh crore in the current financial year due to massive disruption caused by COVID-19 pandemic. Some pessimism also came with a private report stated that amid uncertain business environment and liquidity pressure arising due to the coronavirus crisis, merger and acquisition (M&A) deals will continue to see deferral or cancellation in the short term as buyers assess the impact of the lockdown. A significant number of M&A deals were either deferred or canceled between April and July, as the nationwide lockdown imposed to curb the spread of the deadly coronavirus, negatively impacted the economic activities and businesses. Finally, the BSE Sensex rose 44.80 points or 0.12% to 38,843.88, while the CNX Nifty was up by 5.80 points or 0.05% to 11,472.25.

 

The US markets ended mostly higher on Tuesday pushing the S&P 500 and Nasdaq indexes to another round of record highs, as investors took some comfort from progress on US-China trade talks. However, the drop by the Dow Jones came as Exxon Mobil, Raytheon and Pfizer moved notably lower following news they are being removed from the blue chip index. The three stocks will be replaced by Salesforce.com, Honeywell, and Amgen, which posted strong gains on the day. The changes to the Dow components come as Apple's upcoming 4-for-1 stock split will reduce the index's weight in the information technology sector. Meanwhile, traders were also looking ahead to Federal Reserve Chair Jerome Powell's speech to the Jackson Hole symposium on Thursday. On the economic data front, reflecting a significant deterioration in consumers' assessment of current conditions, the Conference Board released a report showing US consumer confidence unexpectedly declined for the second straight month in August. The Conference Board said its consumer confidence index slumped to 84.8 in August after tumbling to a downwardly revised 91.7 in July. The continued decrease came as a surprise to participants, who had expected the index to inch up to 93.0 from the 92.6 originally reported for the previous month. Besides, New home sales in the U.S. saw another substantial increase in the month of July, according to a report released by the Commerce Department. The report said new home sales spiked by 13.9 percent to an annual rate of 901,000 in July after soaring by 15.1 percent to a rate of 791,000 in June. Street had expected new home sales to climb by 1.2 percent to a rate of 785,000 from the 776,000 originally reported for the previous month.

 

Crude oil futures ended higher on Tuesday as storms forced the shutdown of more than 80% of offshore crude-oil production in the Gulf of Mexico and prompted refinery cuts. Tropical Storm Marco made landfall Monday and was downgraded to a post-tropical cyclone Tuesday morning. Attention is focused on Laura, which was upgraded to a hurricane Tuesday morning and is expected to make landfall on the US Gulf Coast later this week. On the coronavirus front, the World Health Organization (WHO) said that the Covid-19 pandemic is still expanding, but the rise in cases and deaths has slowed globally, except for Southeast Asia and the eastern Mediterranean regions. Crude oil futures for October rose 73 cents or 1.7 percent to settle at $43.35 a barrel on the New York Mercantile Exchange. October Brent crude gained 73 cents or 1.6 percent to settle at $45.86 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended tad lower against dollar on Tuesday, on account of dollar demand from importers and banks. However, downfall remained capped as ratings agency Crisil expects India's retail food inflation, measured through the Consumer Price Index (CPI), to ease in the second half of this financial year. It added that the key risk to this forecast remains the rate of spread of Covid-19 in rural areas, which may adversely impact the harvest and the supply chain, pushing up retail food prices. Meanwhile, the government is considering a proposal to permit foreign direct investment (FDI) in limited liability partnership firms engaged in construction development. On the global market, dollar fell and the Australian dollar and Chinese yuan rose after the United States and China both hailed a phone call between their senior trade officials as a success. Finally, the rupee ended at 74.33, 1 paise weaker from its previous close of 74.32 on Monday.

 

The FIIs as per Tuesday's data were net buyers in both equity segment and debt segment. In equity segment, the gross buying was of Rs 5309.29 crore against gross selling of Rs 4247.05 crore, while in the debt segment, the gross purchase was of Rs 1600.08 crore with gross sales of Rs 1469.75 crore. Besides, in the hybrid segment, the gross buying was of Rs 4.65 crore against gross selling of Rs 11.34 crore.

 

The US markets ended mostly higher on Tuesday ahead to Federal Reserve Chair Jerome Powell's speech to the Jackson Hole symposium on Thursday. Asian markets are trading mixed on Wednesday after major indexes on Wall Street notched new records yet again overnight. Indian markets gave up most of their early gains and ended slightly higher on Tuesday in spite of positive global cues following impressive German data, positive news on the coronavirus front and signs of progress in U.S.-China trade negotiations. Today, the start of session is likely to be flat-to-positive following overnight gains on Wall Street. Traders will be getting some encouragement as Moody's Investors Service said India, China and Indonesia will be the only G-20 emerging economies to post a strong enough pick up of real GDP in the second half of 2020, and retained its projection of 3.1 per cent growth contraction for India in 2020. Some support will also come with Finance Minister Nirmala Sitharaman's statement that the government is open to further tweaking the Rs 3 lakh crore credit guarantee scheme for providing collateral-free loans to small businesses. Traders may take note of report that India's confirmed case tally is over 3.1 million now, with 22.2 per cent cases still active. Recovery rate has now risen to over 75 per cent, with over 2.4 million successfully cured. Meanwhile, the Finance Ministry said banks have sanctioned loans of about Rs 1,55,995 crore under the Rs 3-trillion Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector reeling under the slowdown caused by the coronavirus pandemic. Though, traders may be concerned as the Reserve Bank of India (RBI) in its annual report for 2019-20 said that the Country's headline inflation is expected to firm up further in the coming months largely due to disruptions in food and manufactured items' supply chains. There may be some cautiousness with rating agency ICRA's report that the economy is expected to contract by 25 per cent each in the first quarter of FY'21 both in terms of GDP ( gross domestic product) as well GVA (gross value added). Banking stocks will be in focus with a private report that even though the unlock phases have kick started economic activities in various sectors, most banks believe that meaningful credit growth recovery is likely only after 18 months, while near-term uncertainty on asset quality remains. There will be some reaction in metal stocks with worldsteel's report that India's crude steel output fell 24.6 percent to 7.150 million tonnes (MT) during July 2020. Agriculture industry stocks will also be in limelight as the RBI flagged concerns about impact of climate change, in terms of volatile rainfall intensity, increase in extreme events and rising temperature, having implications for India's agriculture outlook.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,472.25

11,421.76

11,524.31

BSE Sensex

38,843.88

38,679.67

39,008.89

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

State Bank of India

1,053.97

207.95

204.29

210.04

Tata Motors

902.67

127.10

122.69

129.94

ICICI Bank

530.73

386.35

381.90

390.30

NTPC

509.46

103.80

102.20

106.40

Zee Entertainment Enterprises

322.96

199.95

196.96

203.71

 

  • Wipro has entered into partnership with industry-leading Standard Initial Margin Model vendor, Quaternion Risk Management. 
  • Tech Mahindra has collaborated with the Niti Aayog's WEP to support women entrepreneurs across the country. 
  • Kotak Mahindra Bank has launched Cardless Cash Withdrawal Facility through ATMs. 
  • Dr. Reddy's Laboratories has forayed into hospital nutrition segment in the country with the launch of a new nutrition drink for people suffering with critical illnesses.
News Analysis