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Market Commentary 26 March 2018
Markets to make pessimistic start on weak global cues

 

Indian equity benchmarks witnessed bloodbath on Friday with frontline gauges tumbling below their crucial 10,000 (Nifty) and 32,600 (Sensex) levels, 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. Markets started the session with a huge gap on down side and traded in a particular range throughout the day, as sentiment remained dampened on ICRA's 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. Investors took note of a private report which said that handling the emerging frauds in the banking sector coupled with likely ripple effects, muted GST collections and the protectionist policy imposed by the US are some of the factors that are likely to keep risk to growth elevated. As per its economic forecast for March 2018, the report added that the government faces a challenging scenario of managing the growth momentum. Sentiments also remained downbeat, as another private report highlighted that India has emerged as one of the Asian economies most vulnerable in an environment of rising interest rates in the US. Traders took note of Commerce Minister Suresh Prabhu's statement that the world is facing serious challenges as the US is taking protectionist measures and India needs to explore ways to boost exports. Traders shrugged off 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. Finally, the BSE Sensex declined 409.73 points or 1.24% to 32,596.54, while the CNX Nifty was down by 116.70 points or 1.15% to 9,998.05.

 

Extending southward journey for third straight day, Indian equity benchmarks ended the session sharply lower on Friday. Lingering trade war concerns dampened sentiments, as China said it would impose tariffs on up to $3 billion worth of U.S. goods in retaliation for the tariffs announced by President Donald Trump. Traders were also digesting a mixed batch of U.S. economic data, with separate reports from the Commerce Department showing a jump in durable goods orders but a drop in new home sales. The Commerce Department said durable goods orders increased 3.1 percent in February after declining by 3.5 percent in January. The street had expected durable goods orders to increase by 1.5 percent. Excluding a spike in orders for transportation equipment, durable goods orders still climbed by 1.2 percent in February after edging down by 0.2 percent in January. Ex-transportation orders had been expected to rise by 0.5 percent. Separately, a report said new home sales fell by 0.6 percent to an annual rate of 618,000 in February from an upwardly revised 622,000 in January. The street had expected new home sales to rise to a rate of 623,000 from the 593,000 originally reported for the previous month. The Dow Jones Industrial Average lost 424.69 points or 1.77 percent to 23,533.20, the Nasdaq dropped 174.01 points or 2.43 percent to 6,992.67, while the S&P 500 was down by 55.43 points or 2.10 percent to 2,588.26.

 

Crude oil futures edged higher on Friday, hitting eight-week high as the growing risk of renewed sanctions on Iran. The up-move was also supported by the possibility of an extension of OPEC production curbs into 2019 help prices notch their largest weekly gain since July. Prices had suffered their worst hit in two weeks on Thursday, on account of gains in U.S. production and as the risk of a global trade war weighed on financial markets the world over. However, oil prices had been boosted earlier this week by growing concerns around U.S. relations with major oil producers Venezuela and Iran. Benchmark crude oil futures for May surged $1.58 or 2.5 percent at $65.88 a barrel on the New York Mercantile Exchange. May Brent crude gained $1.54 cents or 2.2 percent to settle at $70.45 a barrel on London's Intercontinental Exchange.

 

Rising for the second straight day, Indian rupee ended stronger against dollar on Friday, owing to dollar sale by exporters and banks. Traders took support 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. Besides, dollar losing sheen against some other currencies overseas also supported the local unit. However, heavy losses in the domestic equity market restricted the further up move. On the global front, dollar dropped against most major currencies on Friday, sliding to its lowest level against the yen since the U.S. election in 2016 in a flight to so-called haven assets as the trade rhetoric between President Trump and China hardened. Finally, the rupee ended at 65.01, 10 paise stronger from its previous close of 65.11 on Thursday.

 

The FIIs as per Friday's data were net buyers in equity segment, while they were net sellers in debt segment, in equity segment, the gross buying was of Rs 5230.34 crore against gross selling of Rs 5158.08 crore, while in the debt segment, the gross purchase was of Rs 1115.20 crore with gross sales of Rs 1999.46 crore. Besides, in hybrid segment, the gross buying was of Rs 0.63 crore against gross selling of Rs 0.62 crore.

 

The US markets ended their worst week in more than two years on Friday after China threatened to respond in kind to President Trump's imposition of $60 billion in tariffs on Chinese imports. Asian markets are trading mostly lower on Monday, following a global sell-off late last week amid fears that rising tensions between the United States and China could lead to a full-blown trade war. Indian markets fell for a second consecutive session on Friday to join a global sell-off as increased fears of a global trade war dented investor sentiment and spurred demand for safe-haven assets. Today, the start of the session is likely to be on the negative side tracking weak global cues. Traders will also remain concern on Assocham's report that the escalation of global trade protectionist measures into a full-scale global trade war will damage the Indian economy as well. A full-scale global trade war will impact the country's exports and enlarge its current account deficit (CAD). Ficci has said India should play a proactive role in defusing the emerging possibilities of a global trade war that can derail the positive outlook in the world trade. Moreover, former Reserve Bank of India Governor Raghuram Rajan said the global economic recovery could be hit if the trade war between the US and China escalate. Investors may also remain anxious on report that the country's foreign exchange reserves decreased marginally by $152.4 million to $421.334 billion in the week to March 16, on account of a fall in foreign currency assets. In the previous week, the reserves had increased by $728.9 million to $421.487 billion. The reserves had touched a life-time high of $421.914 billion on February 9, FY18. Meanwhile, markets regulator SEBI is considering to come out with new norms on share buyback programme, under which maximum limit for share repurchase will be 25 per cent of the company's paid-up capital and other reserves.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

9,998.05

9,957.40

10,033.20

BSE Sensex

32,596.54

32,480.24

32,716.43

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank

319.23

275.55

273.45

277.75

Axis Bank

293.85

499.50

493.58

507.83

SBI

271.50

234.80

231.55

238.85

Yes Bank

216.18

286.65

283.42

291.47

Tata Steel

141.34

566.50

557.07

572.37

 

  • Infosys has made a follow-on investment of $1.5 million through the Infosys Innovation Fund in Waterline Data Science. 
  • Hero MotoCorp has commenced the construction of its new manufacturing facility in the state of Andhra Pradesh. 
  • Tata Motors' subsidiary - JLR has inked a multi-year agreement with Canadian firm BlackBerry. 
  • L&T's defence arm has inaugurated a -- Multi-Skill Training Centre -- at Visakhapatnam, under its Corporate Social Responsibility initiative.
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