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Market Commentary 17 July 2018
Markets to make cautious start amid subdued global cues

 

Monday turned-out to be a disappointing day of trade for Indian equity benchmarks with frontline gauges ending near intraday low levels, breaching their crucial 36,400 (Sensex) and 10,950 (Nifty) mark. Markets started the session with cautious tone ahead of more corporate earnings this week. Sentiments turned pessimistic and markets extended losses in second half of the trade on the back of high Wholesale Price Index (WPI) data. India's wholesale inflation grew 5.77% in June, a four-and-half year high, driven by some food items and fuel prices. Traders remained cautious with commerce ministry's report showing that India's trade deficit widened to its highest level in more than five years in June, driven largely by a surge in oil prices and a weaker rupee. The trade deficit widened to $16.6 billion from $14.62 billion in May, though merchandise exports rose 17.57% year-on-year in June, on account of healthy growth in sectors such as petroleum and chemicals, while imports rose 21.31% to $44.3 billion during the month. Anxiety also prevailed in the markets with Reserve Bank of India's data that the country's foreign exchange reserves declined by $248.20 million to $405.81 billion in the week to July 6, despite a rise in the foreign currency assets. Markets continued southward moment in last leg of trade with foreign investors pulling out nearly Rs 1,200 crore from the debt markets in the first two weeks of the month on higher fuel prices and possibilities of rate hike by the US Federal Reserve. Traders paid no heed towards Economic Affairs Secretary Subhash Chandra Garg's statement that the Indian economy is at a take off stage and is expected to be the world's third largest by 2030 with GDP worth $10 trillion. Investors failed to get any support with the Union Minister Arun Jaitley exuding confidence that India will pip Great Britain to become the fifth largest economy in the world next year if economic expansion continues at the projected rate. Finance Minister Piyush Goyal's statement that the Centre is looking at simplify the companies law to provide relief to businesses, too failed to provide any relief to the market participants. Finally, the BSE Sensex declined 217.86 points or 0.60% to 36,323.77, while the CNX Nifty was down by 82.05 points or 0.74% to 10,936.85.

 

After strong upward move seen last week, the US markets end mostly lower on Monday as traders seemed reluctant to make significant moves ahead of the release of quarterly financial results from a number of big-name companies this week. Goldman Sachs (GS), Johnson & Johnson (JNJ), Morgan Stanley (MS), American Express (AXP), IBM Corp. (IBM), Microsoft (MSFT), and General Electric (GE) are among the companies due to report their results in the coming days. Further, the sell-off by energy stocks also restricted the markets to go up amid a sharp drop by the price of crude oil, as crude for August delivery plunged $2.95 to $68.06 a barrel. Meanwhile, investors also watched President Donald Trump and Russian President Vladimir Putin convene for a summit in Helsinki, Finland but reaction to a joint conference with the two leaders was muted. Traders largely refrained from cashing in on last week's gains after a report from the Commerce Department showed retail sales in the US increased in line with street estimates in the month of June. The report said retail sales climbed by 0.5% in June after soaring by an upwardly revised 1.3% in May. Excluding a jump in auto sales, retail sales still rose by 0.4% in June following a 1.4% spike in May. The S&P 500 declined 2.88 points or 0.10 percent to 2798.43 and the Nasdaq was down by 20.26 points or 0.26 percent to 7805.72, while The Dow Jones Industrial Average gained 44.95 points or 0.18 percent to 25064.36.

 

Crude oil futures ended lower on Monday, with the benchmark was on the defensive because of the potential release of oil from global reserves. Further, traders also fretted over a potential slowdown in the global economy, which could hurt demand for oil. The IMF said that growth is slowing in the euro area, Japan and the United Kingdom and warned that a further escalation of trade tensions stands as the greatest near-term threat to global growth. The potential for US waivers on Iran oil sanctions and slowdown in global economic growth pushing prices for global benchmark Brent crude to their lowest finish in three months. Benchmark crude oil futures for August declined $2.95 or nearly 4.2 percent to settle at $68.06 a barrel on the New York Mercantile Exchange. September Brent crude fell $3.49 or 4.6 percent at $71.84 a barrel on London's Intercontinental Exchange.

 

Snapping three day gaining streak, Indian rupee ended marginally weaker against the American currency on Monday, on sustained dollar demand and widening trade deficit. India's trade deficit widened to a 43-month high of $16.60 billion compared with $12.96 billion in the same month last year, driven largely by a surge in oil prices and a weaker rupee. Some concern also came with data showing that India's wholesale inflation grew 5.77% in June, a four-and-half year high, driven by some food items and fuel prices. However, the rupee pared some of the losses in final hours as some optimism remained among the investors with Economic Affairs Secretary Subhash Chandra Garg's statement that the Indian economy is at a take off stage and is expected to be the world's third largest by 2030 with GDP worth $10 trillion. On the global front, dollar slipped lower against a currency basket on Monday, having posted its largest weekly gain in a month last week as investors turned their attention to US retail sales figures for June later in the session. Finally, the rupee ended at 68.58, 4 paise weaker from its previous close of 68.54 on Friday.

 

The FIIs as per Monday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 5021.73 crore against gross selling of Rs 5062.57 crore, while in the debt segment, the gross purchase was of Rs 3188.72 crore with gross sales of Rs 3522.82 crore. Besides in the hybrid segment, the gross buying was of Rs 0.96 crore against gross selling of Rs 1.08 crore.

 

The US markets ended mostly lower on Monday, as investors looked ahead to a busy week of corporate earnings results. Asian markets were trading mostly in red on Tuesday, as investors assess whether corporate earnings can deliver on high expectations against a backdrop of trade tensions. Sharp selloff in the dying hours of trade dragged equity benchmarks lower on Monday. Sentiments remained dampened, as India's wholesale inflation grew 5.77% in June, a four-and-half year high, due to rise in prices of some food items and fuel prices. Today, the markets are likely to make a cautious start amid subdued global cues. There will be some cautiousness with report that the International Monetary Fund (IMF) trimmed India's growth projection by 0.1 percentage point to 7.3% for 2018-19 against the earlier estimate of 7.4%, owing to high oil prices and a tight monetary policy regime. IMF said that India's growth rate is expected to rise to 7.3% in 2018 (2018-19) and 7.5% in 2019 (2019-20), the projection is 0.1 and 0.3 percentage point lower for 2018 and 2019, respectively. Traders will also be concern about the IHS Markit Business Outlook survey stating that the Indian business sentiment regarding future activity remained subdued in June amid intense competition, high fuel prices and strong cost pressures. Also, there will be negative reaction on rating agency Moody's Investor Service in its latest report warning that interest costs on loan against property (LAP) are set to rise due to the hardening rates and will adversely affect small business, which are already reeling under note-ban and Goods and Services Tax (GST) impact. There will be some buzz in auto components sector stocks with Crisil's latest report that the growth prospects for the Indian auto components sector are bright over the next two-three years. It said that the ancillary industry will clock healthy growth steered by product changes (replacing metal with plastic or high-grade and lighter metals, increasing electronic content) and regulations (emission and safety norms). There will be some earnings announcements too to keep the markets buzzing.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,936.85

10,902.23

10,995.48

BSE Sensex

36,323.77

36,195.57

36,555.34

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank

297.94

259.25

254.97

265.07

Infosys

176.72

1,332.85

1,285.57

1,382.27

Tata Steel

111.60

519.25

504.23

547.08

Tata Motors

110.67

252.10

248.13

258.43

ITC

102.81

271.60

269.77

273.37

 

  • Yes Bank has launched Yes Scale: Cleantech Accelerator, as part of its multi-sector start-up accelerator Yes Scale. 
  • Hindustan Unilever has reported a rise of 19.17% in its net profit at Rs 1,529 crore for Q1FY19 as compared to Rs 1,283 crore for Q1FY18. 
  • Essel Corporate LLP is proposing to acquire 1.5 crore shares of Zee Entertainment Enterprises. 
  • Infosys has reported a marginal rise of 2.58% in its net profit at Rs 3,503 crore for Q1FY19 as compared to Rs 3,415 crore for Q1FY18.
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