NSE Intra-day chart (03 June 2020)
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Market Commentary 04 June 2020
Benchmarks to make flat-to-positive start following global markets

 

Extending their northward journey for sixth straight session, Indian equity benchmarks reclaimed their crucial 34,100 (Sensex) and 10,050 (Nifty) levels on Wednesday. Markets started the session on an optimistic note as traders took encouragement with Prime Minister Narendra Modi's assurance to India Inc that growth in the economy will return soon as the government continues to pursue multiple reforms. He added that with unlock phase-1 India has already begun getting its growth back. Some support also came as the World Bank urged countries to go for comprehensive policies to boost long-term growth along with short term measures to address health emergencies and secure core public services in the wake of the coronavirus crisis, amid indications that 60 million people could be pushed into extreme poverty in 2020. Markets continued their bull run even after business activity across India's service sector fell drastically during May as the unfavourable economic effects of the coronavirus disease 2019 (COVID-19) pandemic impaired business operations, restricted consumer footfall and led demand to collapse. While most measures came off the unprecedented lows seen in April, survey data still pointed to extreme month-to-month declines in output and new orders. However, key gauges gave up some of their gains in final hour of trade after Former finance secretary Subhash Chandra Garg's statement that the Indian economy will shrink by 10 percent or Rs 20 lakh crore in current financial year (FY21), the first contraction in over 40 years, due to a faulty COVID lockdown. Meanwhile, the data compiled by Worldometer showed that India has seen a surge of over 8,500 cases in a day, taking its total number of coronavirus cases to 207,191. The country's death toll now stands at 5,829. Finally, the BSE Sensex gained 284.01 points or 0.84% to 34109.54, while the CNX Nifty was up by 82.45 points or 0.83% to 10,061.55.

 

The US markets ended higher on Wednesday, extending the upward trend seen in recent sessions, as new economic data added to investor optimism about a quick recovery, including a report from payroll processor ADP showing the pace of private sector job losses slowed by much more than anticipated in the month of May. ADP said private sector employment slumped by 2.76 million jobs in May after plummeting by a revised 19.557 million jobs in April. Street had expected employment to plunge by about 9.0 million jobs compared to 20.236 million job nosedive originally reported for the previous month. A separate report from the Institute for Supply Management also showed the pace of contraction in the service sector slowed by even more than street had been expecting. The ISM said its non-manufacturing index rebounded to 45.4 in May after plunging to an eleven-year low of 41.8 in April. A reading below 50 still indicates a contraction in service sector activity, but the index came in above street estimates for a reading of 44.0. The US data came after survey results from IHS Markit showed China's service sector expanded for the first time in four months in May amid an easing of measures implemented to curb the spread of the coronavirus.

 

Crude oil futures ended higher on Wednesday, extending a move around the highest level since early March, on reports the OPEC+ will likely extend production cuts by another month. Data showing a drop in US crude inventories last week, and expectations of increased demand for oil amid reopening of the economies also contributed to the uptick in crude oil prices.  The Energy Information Administration reported that US crude inventories edged down by 2.1 million barrels for the week ended May 29, against expectations for an increase in inventories. The American Petroleum Institute said on Tuesday that US crude inventories fell by 483,000 barrels for the week ending May 29. Crude oil futures for July rose 48 cents or 1.3 percent to settle at $37.29 a barrel on the New York Mercantile Exchange. August Brent crude added 22 cents or 0.6 percent to settle at $ 39.79 a barrel on London's Intercontinental Exchange.

 

Erasing all initial gains, Indian rupee ended weaker against dollar on Wednesday, on emergence of demand for the greenback from importers. Investors' sentiment remained fragile with former finance secretary Subhash Chandra Garg's statement that the Indian economy will shrink by 10 percent or Rs 20 lakh crore in current financial year (FY21), the first contraction in over 40 years, due to a faulty COVID lockdown. However, gains in domestic equity markets provided some support to the rupee, keeping the downside in check. On the global front, euro topped an 11-week high on Wednesday, on track for a seven-day winning streak, with the dollar falling against most currencies as the prospects of more stimulus and hopes for economic recovery emboldened investors to buy riskier assets. Finally, the rupee ended at 75.47, 11 paise weaker from its previous close of 75.36 on Tuesday.

 

The FIIs as per Wednesday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 12567.12 crore against gross selling of Rs 4676.93 crore, while in the debt segment, the gross purchase was of Rs 832.29 crore with gross sales of Rs 721.78 crore. Besides, in the hybrid segment, the gross buying was of Rs 10.29 crore against gross selling of Rs 5.07 crore.

 

The US markets ended higher on Wednesday as new economic data added to investor optimism about a quick recovery. Asian markets are trading mostly in green on Thursday as optimism over the economic recovery from the coronavirus pandemic continued to keep investor sentiment afloat. Indian markets ended higher for sixth straight session on Wednesday amid hopes for V-shaped recovery coupled with expectations of central bank policy support. Today, the markets are likely to make flat-to-positive start following positive global cues. Traders will be getting some encouragement with Union minister Prakash Javdekar's statement that the government has formed an empowered group of secretaries to enhance investment in the country to offset the impact of coronavirus. Some support will also come with a private report that after Russia approved the use of Avifavir, a derivative of favipiravir, for treatment of the new coronavirues, India is gearing up to ensure the antiviral drug is soon available here. However, traders may be concerned with report that India has on June 04 recorded its biggest spike in the number of coronavirus cases, with over 9,000 of them being reported in a single day, besides over 250 deaths. The total number of corona cases in the country stands at 216,824. There may be some cautiousness with report that days after downgrading India's sovereign ratings, global credit ratings agency Moody's Investors Service said that the quality of retail and small business loans will also deteriorate. Meanwhile, the Union Cabinet has approved amendments to the Essential Commodities Act. The amendment will deregulate food items like cereals, pulses and onion from stockholding limit. Aviation stocks will be in focus with ratings agency Icra's statement that air passenger traffic in the country is expected to remain under pressure for the first half (April-September) of the current fiscal, with the full year passenger volume likely to go down by about half despite some recovery in H2 FY21. There will be some reaction in MSME stocks with report that the finance ministry said that public sector banks (PSBs) have disbursed Rs 3,892.78 crore in the first two days of the month under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector hit hard by the coronavirus-induced lockdown.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,061.55

10,006.00

10,146.65

BSE Sensex

34,109.54

33,928.46

34,389.65

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

State Bank of India

1,131.74

174.90

171.30

179.20

Tata Motors

906.00

98.75

96.95

101.00

ICICI Bank

696.90

356.85

349.43

368.63

Axis Bank

490.57

409.55

399.20

425.95

Vedanta

379.33

96.70

94.23

100.83

 

  • Hindustan Unilever has donated 74,328 RT-PCR COVID-19 testing kits worth Rs 13 crore to help ramp up testing of patients in the country. 
  • Tata Motors has resumed operations across all its manufacturing plants in the country with Jamshedpur facility also getting approval on May 27, 2020. 
  • Coal India has reported fall in its production by 11.3% to 41.43 million tonnes in May 2020. 
  • Tata Steel has raised Rs 400 crore through Unsecured, Rated, Listed, Redeemable, Floating Coupon, NCDs on private placement basis.
News Analysis