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Market Commentary 23 March 2018
Markets to make pessimistic start on feeble global cues

                                                                     

Thursday turned out to be a dismal day of trade for Indian equity markets with frontline gauges ending the session with a cut of around half a percent, after the US Federal Reserve raised interest rates while retaining its view for three hikes this year. In its first policy meeting under new Fed chief Jerome Powell, the US central bank indicated that inflation should finally move higher after years below its 2% target and that the economy had recently gained momentum. Markets, however, started the session on an optimistic note as traders took some encouragement with report that private equity (PE) investments witnessing a two-fold jump in February with transactions worth $1.3 billion taking the deal tally for the first two months of this year to $2.3 billion. There were 62 PE deals worth $1,330 million, while in the corresponding period last year there were 45 such transactions worth $588 million. Meanwhile, the Union Cabinet has given its approval for revision of the agreement between India and Qatar for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income. But traders pared early gains and markets entered into red terrain in second half of the session to end lower. Selling in banking counters too dampened sentiments, as traders shrugged off S&P Global Ratings' report stated that the banking sector could witness a turnaround in fiscal 2019-20. The report added that the banking sector's performance will get a boost from economic expansion and believes its deep protracted credit down cycle is nearing, with a turnaround by fiscal 2020. In addition, government and RBI's significant steps are aiding the recovery. Sell off in telecom stocks too weighed sentiments on report that telecom operators including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm have been served notices for exaggerated credit claims under the goods and services tax. Finally, the BSE Sensex declined 129.91 points or 0.39% to 33,006.27, while the CNX Nifty was down by 40.50 points or 0.40% to 10,114.75.

 

The US markets fell sharply on Thursday, with major indexes suffering their worst day in weeks as the treat of a trade war with China sparked a widespread selloff. Losses accelerated throughout afternoon trading, pushing the S&P 500 into negative territory for the year in a decline that showed signs of panic. Also weighing on sentiment was the latest policy statement by the Federal Reserve a day earlier, which raised questions about interest-rate policy; ongoing weakness at Facebook, which led the technology sector lower; and the resignation of President Donald Trump's lead attorney, which added another element of political uncertainty for investors. The Trump administration instructed the office of the US Trade Representative to draw up a list of tariffs on Chinese products totaling up to $60 billion. The tariffs are expected to target sensitive technologies that the US considers vital to the US economy in the years ahead, and the announcement follows a similar one focused on steel and aluminum. On the economy front, initial US jobless claims rose by 3,000 to 229,000 in mid-March, but they remain near the lowest levels since 1970. And the number of people collecting benefits fell to a fresh 45-year low. The more stable monthly average of claims increased by 2,250 and stood at 223,750. The Dow Jones Industrial Average lost 724.42 points or 2.93 percent to 23,957.89, the Nasdaq dropped 178.608 points or 2.43 percent to 7,166.68, while the S&P 500 was down by 68.24 points or 2.52 percent to 2,643.69. 

 

Crude oil futures edged lower on Thursday pressured by gains in U.S. production, as the risk of a global trade war weighed on the stock market. Moreover, hawkish comments from Federal Reserve officials spooked investors across many asset classes. With an oil market that already had upward momentum from rising Saudi/Iran tensions and a negative outlook for Venezuela production, the bullish inventory data provided a spark that sent oil to multi-week highs. But the EIA also reported that U.S. production edged up by 26,000 barrels a day to 10.407 million barrels a day, a fresh weekly record. Benchmark crude oil futures for April delivery declined 87 cents or 1.3 percent at $64.30 a barrel on the New York Mercantile Exchange. May Brent crude shed 56 cents or 0.8 percent to settle at $68.91 a barrel on London's Intercontinental Exchange.

 

Snapping five day losing streak, Indian rupee bounced back against the Greenback on Thursday, on the back of fresh dollar selling by exporters and some banks. Traders took support with a report that private equity (PE) investments witnessed a two-fold jump in February with transactions worth $1.3 billion taking the deal tally for the first two months of this year to $2.3 billion. There were 62 PE deals worth $1,330 million, while in the corresponding period last year there were 45 such transactions worth $588 million. Besides, the dollar losing muscle against some currencies overseas largely supported the rupee's recovery. However, selling in last hour of trade in the domestic equity markets restricted the further up move. On the global front, pound traded close to a seven-week high against dollar on Thursday, heading up after stronger-than-expected UK retail sales and as traders waited for the latest Bank of England announcement.  Finally, the rupee ended at 65.11, 10 paise stronger from its previous close of 65.21 on Wednesday.

 

The FIIs as per Thursday'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 5560.95 crore against gross selling of Rs 5631.46 crore, while in the debt segment, the gross purchase was of Rs 2139.83 crore with gross sales of Rs 1238.39 crore. Besides, in the hybrid segment, the gross buying was of Rs 14.82 crore against gross selling of Rs 2.01 crore.

 

The US markets closed sharply lower on Thursday, as traders remained concerned about the impact of a potential trade war after President Donald Trump announced tariffs on at least $50 billion worth of Chinese imports. Asian markets were trading in red on Friday, tracking sharp falls in U.S. and European stocks, which took a hit on fears of a potential trade war. Indian markets declined on Thursday after the U.S. Federal Reserve raised interest rates by 25 basis points while reiterating its plan to raise rates gradually. Today, the start of the session is likely to be on the negative side tracking weak global cues, as traders remained worried on fears of a potential trade war. Traders will also remain concern on private report stating the country's current account deficit (CAD) is likely to treble to $10-12 billion in the fourth quarter of the current financial year, against the same year-ago period, due to higher trade deficit. The current account deficit had increased to $13.5 billion, or 2 per cent of the gross domestic product (GDP) in the third quarter as well, against $8 billion, or 1.4 per cent of GDP in the same year-ago period. Traders may get some solace later in the day with report that  monsoon rains in India are likely to be unaffected by the El Nino weather pattern, which is likely to set in only after the four-month rainy season ends in September. Monsoon season delivers about 70 percent of India's annual rainfall and is key to the success of the farm sector, which accounts for about 15 percent of India's $2 trillion economy but sustains nearly two thirds of the country's 1.3 billion people. There will be buzz in textile related stocks on report that the Textile Ministry will set up an inter-ministerial committee and allocate it a sum of Rs 1,000 crore to promote research & development (R&D), technology transfer and training in the sector.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,114.75

10,077.48

10,179.93

BSE Sensex

33,006.27

32,885.80

33,204.26

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

SBI

268.28

241.55

239.02

245.72

ICICI Bank

245.93

283.25

279.55

288.30

Yes Bank

193.57

298.25

294.77

302.72

Vedanta

120.08

291.80

287.07

295.37

Tata Steel

114.86

580.90

572.78

588.23

 

  • Sun Pharma has received USFDA approval for ILUMYA used for the treatment of adults with moderate-to-severe plaque psoriasis who are candidates for systemic therapy or phototherapy. 
  • Coal India is planning to set up plants for coal gasification and its further processing into downstream chemicals, with an aim to promote environment-friendly uses of coal. 
  • Tata Motors' Tata Nexon has entered into association with the Board of Control for Cricket in India as the Official Partner for the VIVO IPL. 
  • L&T's construction arm -- L&T Construction's Water & Effluent Treatment Business has entered Guinness World Records books for conducting the Largest Environmental Sustainability Lesson.
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