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NSE Intra-day chart (20 July 2018)
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Market Commentary 23 July 2018
Markets to make cautious start amid weak global cues


Indian equity benchmarks ended the Friday's trade on an optimistic note with Nifty recapturing its crucial 11,000 mark, while Sensex end just shy of 36,500 mark. After making a cautious, markets gained traction and traded significantly throughout the day as traders took encouragement with industry body Ficci's statement that despite short-term challenges, India's economic growth story remains intact and the country's Gross Domestic Product (GDP) is expected to grow around 7.5% in the current financial year. Domestic sentiments remained upbeat with India's top envoy to the UN Syed Akbaruddin's statement that India is pushing ahead on its national efforts to meet Sustainable Devolvement Goals by undertaking one of the highest rates of renewable energy expansion and building 11 million homes under the world's largest affordable housing programme. Some support also came with a report that the proposed new industrial policy, to be released soon, would focus on areas such as promotion of digital ports and use of big data to boost India's exports and manufacturing sector. Meanwhile, the no-confidence motion, a first in 15 years, is likely to be a non-event for the markets as they expect the Narendra Modi-led National Democratic Alliance government to sail through easily. Traders also took some encouragement with Asian Development Bank's (ADB) new report stating that South Asia continues to be the fastest growing sub-region, led by India, whose economy is on track to meet fiscal year 2018 projected growth of 7.3% and further accelerating to 7.6% in 2019, as measures taken to strengthen the banking system and tax reform boost investment. Traders shrugged off ICRA's report that India's current account deficit (CAD) is set to widen and the first quarter print may come in at $16-17 billion or 2.5% of GDP and added that for the full year the gap may scale a six-year high of $67-72 billion. Finally, the BSE Sensex surged 145.14 points or 0.40% to 36,496.37, while the CNX Nifty was up by 53.10 points or 0.48% to 11,010.20.


The US markets ended marginally lower on Friday, as bond yields jumped, a shift that helped banks but hurt companies that pay big dividends. Investors remained concerned with report that the trade tensions could escalate into a full-scale trade war, which could hurt growth and business spending. The Trump administration previously imposed tariffs of $34 billion worth of Chinese imports and has threatened to impose tariffs on another $200 billion worth of goods. Trump argued the strength in the stock market since his election has allowed him to be more aggressive on trade, claiming, We're playing with the bank's money. Trump signaled for a second straight day his frustration with the Federal Reserve's policy of gradually raising interest rates, arguing that it has the potential to undermine his fiscal-stimulus measures intended to boost US economic expansion in its ninth year, even as the president locks horns with trade partners across the globe. Trump said he was ready to put tariffs on all Chinese goods imported to the US, which would amount to more than $500 billion. The comments were the latest in a series that pointed to worsening trade relations; on Thursday, Trump threatened tremendous retribution against the European Union and stood by a pledge to levy tariffs on automobile imports. However, strong quarterly results from some of the largest US companies, including Microsoft and Honeywell capped the losses on Wall Street. The Dow Jones Industrial Average dropped 6.38 points or 0.03 percent to 25058.12, the S&P 500 declined 2.66 points or 0.09 percent to 2801.83 and the Nasdaq was down by 5.10 points or 0.07 percent to 7820.20.


Crude oil futures ended higher on Friday, extending gains from a day earlier when comments from Saudi Arabia's OPEC governor eased concerns over the potential for an oversupplied market. Saudi Arabia's OPEC Governor Adeeb Al-Aama said that the kingdom expects crude exports to fall by about 100,000 barrels per day in August as it limits excess production. He added that concerns the oil cartel and its allies could oversupply the market with more output are without basis. Meanwhile, oilfield services firm Baker Hughes reported that the number of US oil drilling rigs in operation fell by 5 to 858. That was the first decline in nearly one month, pointing to signs of tightening US output. Benchmark crude oil futures for August inched up by $1 or 1.4 percent to settle at $70.46 a barrel on the New York Mercantile Exchange. September Brent crude slipped 2 cents at $68.26 a barrel on London's Intercontinental Exchange.


After yesterday's steep losses, Indian rupee gained ground against dollar and ended higher on Friday, on persistent selling of the American currency by exporters. Sentiments turned optimistic with industry body Ficci's statement that despite short-term challenges, India's economic growth story remains intact and the country's Gross Domestic Product (GDP) is expected to grow around 7.5% in the current financial year. Adding confidence among investors, Asian Development Bank's (ADB) new report said that South Asia continues to be the fastest growing sub-region, led by India, whose economy is on track to meet fiscal year 2018 projected growth of 7.3% and further accelerating to 7.6% in 2019, as measures taken to strengthen the banking system and tax reform boost investment. Moreover, dollar's weakness against other currencies in the global market made the local unit stronger. On the global front, dollar was on the defensive against yen and euro on Friday after US President Donald Trump expressed concern about the currency's strength and the Federal Reserve's interest rate increases. Finally, the rupee ended at 68.83, 22 paise stronger from its previous close of 69.05 on Thursday.


The FIIs as per Friday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3524.80 crore against gross selling of Rs 3766.89 crore, while in the debt segment, the gross purchase was of Rs 1290.15 crore with gross sales of Rs 1364.12 crore. Besides in the hybrid segment, the gross buying was of Rs 0.71 crore against gross selling of Rs 3.40 crore.


The US markets ended lower on Friday, as White House comments on monetary policy sent the dollar and government bond prices sliding. Asian markets were trading mostly in red in early deals on Monday on fears of more protectionist measures from the United States while the dollar declined against major currencies after US President Donald Trump criticised the Federal Reserve's tightening policy. Indian equity markets ended higher on Friday, amid the no-confidence debate in Lok Sabha. Besides, expectations of the Modi government winning the first no-confidence motion it's facing in four years in the Lok Sabha boosted investor sentiment. Today, the markets are likely to make cautious start of the F&O series expiry week, following weak global cues. Traders will be concern about a report that continuing their selling spree, foreign investors have pulled out over Rs 2,000 crore from the capital markets this month so far on higher crude oil prices and a depreciating rupee. The latest sell-off comes after foreign portfolio investors (FPIs) withdrew over Rs 61,000 crore from the capital markets in the last three months (April to June). However, traders may get some support later in the trade with a private report that the 10 major economies of Asia, including India, are expected to see robust growth and amount to over $28 trillion in real GDP terms on aggregate, more than the US by 2030. There will be some support with retirement fund body EPFO's payroll data suggests that as many as 4,474,859 jobs created during September 2017 to May this year. Meanwhile, the GST Council announced the reduction of rates on a list of 100 items, including sanitary pads, small TVs and footwear. Besides, industry chamber CII said that the decision of the GST Council to cut rates and simplification of return filing process will increase the compliance rate and add to revenue buoyancy. There will be buzz in steel sector stocks with the Joint Plant Committee's latest report stating that India's export of finished steel slumped by 33.7% to 1.351 million tonnes (MT) during the first quarter of the current fiscal. The country had exported 2.037 MT finished steel during the same quarter a year ago. Also, there will be buzz in port sector stocks with Indian Ports Association's (IPA) report that India's top 12 major ports reported a 19.32% surge in imports of thermal coal to 28.28 million tonnes during April-June this year. There will be some important earnings announcements too to keep the markets buzzing.


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