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Market Commentary 01 August 2018
Markets likely to make positive start ahead of RBI's policy outcome

 

Extending record hitting spree for fourth straight session, Indian equity benchmarks once again settled at fresh closing highs. Key gauges started on pessimistic note, as traders remained cautious with report that corporate India's business optimism index for the July-September quarter registered an 11.7% increase over last year, while on a quarter-on-quarter basis it has declined. Some anxiety remained among the local traders with Moody's Investors Service's report which stated that the GST Council's decision to lower rates on several goods and also rationalise rates on some services will impact government's fiscal consolidation effort. Investors took note of Reserve Bank of India's (RBI's) data showing that India Inc raised $2.71 billion through external commercial borrowing (ECB) and rupee-denominated bonds (RDBs) in June 2018, up by 66.3% over the same month last year. As per the data, Indian companies had raised $1.63 billion from overseas sources in June 2017. The mood on the street also remained cautious ahead of the RBI's monetary policy outcome. However, buying which emerged in last leg of trade mainly helped markets to settle above their crucial 37,600 (Sensex) and 11,350 (Nifty) levels. Sentiments turned positive on report that the government sought Parliament's approval for additional gross additional expenditure of Rs 11,697.92 crore for the current fiscal. Traders took note of a private report stating that GDP growth is likely to peak in April-June quarter and then moderate to 7.2% in the second half of 2018 from around 7.8% in first half. Market participants also took some support from Crisil's report that India is much better placed than many other emerging market peers or compared to its own situation in 2013 during the taper tantrum, to tackle risks arising out of asymmetry in monetary policy of advanced economies, the rise in crude prices and the escalation of trade war tension. Finally, the BSE Sensex surged 112.18 points or 0.30% to 37,606.58, while the CNX Nifty was up by 36.95 points or 0.33% to 11,356.50.

 

The US markets ended on an optimistic note with all the major indices settling in green terrain, as sentiments remained up-beat with a private report indicating the U.S. and China are trying to restart talks aimed at averting a full-blown trade war. Some support also came with the latest batch of U.S. economic data, including a report from the Commerce Department showing personal income and spending both increased in line with the street estimates in the month of June. The report said personal income climbed by 0.4 percent in June, matching the increase seen in May as well as expectations. The Commerce Department said personal spending also rose by 0.4 percent in June after climbing by an upwardly revised 0.5 percent in May. The street had expected spending to increase by 0.4 percent compared to the 0.2 percent uptick originally reported for the previous month. A separate report from the Conference Board showed a modest rebound in consumer confidence in the month of July. The Conference Board said its consumer confidence index inched up to 127.4 in July from an upwardly revised 127.1 in June. Meanwhile, traders seemed reluctant to make more significant moves ahead of the Federal Reserve's money policy announcement on August 1. The Fed is widely expected to leave interest rates unchanged, but the accompanying statement is likely to be closely examined for any hints about future rate hikes. The S&P 500 gained 13.69 points or 0.49 percent to 2,816.29 and the Nasdaq jumped 41.78 points or 0.55 percent to 7,671.79 and the Dow Jones Industrial Average was up by 108.36 points or 0.43 percent to 25,415.19.

 

Crude oil futures ended lower on Tuesday, as investors expressed concerns over increased output from OPEC which appeared to reach its high for the year in July. Besides, concerns surrounding Iranian oil eased and traders' attention started to shift to weekly data on US petroleum inventories. Investors looked ahead to data on US supplies, with the American Petroleum Institute slated to deliver its estimate on weekly inventories after Tuesday's close. The Energy Information Administration's (EIA) more closely watched tally is due on Wednesday. As per a private report, the EIA to report a decline of 2.4 million barrels in crude stockpiles for the week ended July 27. Benchmark crude oil futures for September declined $1.37 or 2 percent to settle at $68.76 a barrel on the New York Mercantile Exchange. September Brent crude fell 72 cents or 1 percent at $74.25 a barrel on London's Intercontinental Exchange.

 

Indian rupee strengthened against dollar on Tuesday, on good bouts of dollar-selling by banks and exporters. Market participants took support with a private report stating that GDP growth is likely to peak in April-June quarter and then moderate to 7.2% in the second half of 2018 from around 7.8% in first half. Some comfort also came with Crisil's report that India is much better placed than many other emerging market peers or compared to its own situation in 2013 during the taper tantrum, to tackle risks arising out of asymmetry in monetary policy of advanced economies, the rise in crude prices and the escalation of trade war tension. However, gains remained capped as anxiety remained among traders ahead of the Reserve Bank of India's (RBI) decision on the monetary policy and key interest rates on August 01. On the global front, Japanese yen fell against dollar and is poised to register its biggest daily loss in nearly three weeks on Tuesday after the central bank pledged to keep interest rates low and adopted a forward guidance model to strengthen its commitment for its massive policy stimulus. Finally, the rupee ended at 68.55, 12 paise stronger from its previous close of 68.67 on Monday.

 

The FIIs as per Tuesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 4635.32 crore against gross selling of Rs 4779.98 crore, while in the debt segment, the gross purchase was of Rs 1437.18 crore with gross sales of Rs 720.87 crore. Beside, in the hybrid segment, the gross buying was of Rs 3.99 crore against gross selling of Rs 10.39 crore.

 

The US markets ended higher on Tuesday, following good earnings and economic data and a report that US-China trade talks would resume. Asian markets were trading mostly in green on Wednesday, following gains on Wall Street, as a report of attempts to renew talks between the US and China eased trade war fears, but investors will be keeping a close eye on data due today. Buying in last leg of trade helped Indian equity markets to end Tuesday's session in green territory, with Sensex and Nifty ending at record closing high, supported by IT, energy, metal and pharma stocks. Today, the start of the new month is likely to be on a positive side, ahead of the Reserve Bank of India's (RBI's) monetary policy meeting outcome as well as an outcome from FOMC meeting which will be out later in the day. RBI's monetary policy committee is expected to maintain its neutral policy stance given the volatility in crude oil and food prices. Investors will also be eyeing manufacturing PMI data to be out later in the day. Traders will be getting encouragement with the commerce and industry ministry's data showing that growth of eight core sectors expanded to 7-month high of 6.7% in June on the back of better performance by cement, refinery and coal segments. Investors may get some support with a private report that the Indian economy is likely to have witnessed solid economic growth in the April-June quarter but leading indicators suggest a slowdown in the coming months. The report stated that GDP growth to peak in April-June quarter and then moderate to 7.2% in the second half of 2018 from around 7.8% in first half. Traders will also be reacting to the Controller General of Accounts' (CGA) data showing that government's finances have shown improvement in the June quarter of 2018-19 with fiscal deficit working out to 68.7% of the Budget Estimate, mainly on account of higher revenue collection. There will be some important earnings announcements too to keep the markets buzzing.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,356.50

11,294.17

11,392.42

BSE Sensex

37,606.58

37,388.69

37,734.53

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

SBI

365.10

293.50

289.40

300.00

Axis Bank

217.35

550.40

537.45

573.90

ICICI Bank

208.24

304.25

301.47

307.77

ITC

145.63

297.70

295.05

300.85

Reliance

138.75

1,186.00

1,158.63

1,201.88

 

  • Axis Bank has reported 46.30% fall in its net profit at Rs 701.09 crore for Q1FY19 as compared to Rs 1,305.60 crore for Q1FY18. 
  • Hero MotoCorp is planning to launch new scooters and motorcycles in Iran and Turkey as part of its global expansion strategy. 
  • Coal India has decided to procure mining equipments of Rs 12,000-13,000 crore through global tender over the next three years to ramp up coal production to meet the growing demand. 
  • Mahindra & Mahindra is all set to launch its global model -- Marazzo -- in Q2 of FY-2019.
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