NSE Intra-day chart (04 February 2019)
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Market Commentary 05 February 2019
Benchmarks to open marginally in green

 

Last hour recovery helped the key Indian equity benchmarks to close Monday's trading session in positive territory. The bourses made a negative start, impacted by Moody's Investors Service's statement that the government will find it difficult to meet the fiscal deficit target of 3.4% in 2019-20 on account of higher spending and low revenue growth. Observing that Indian government's debt is stubbornly high as a percentage of GDP, Moody's said it could be brought down only if the Centre sticks to the fiscal consolidation path. The markets participants were nervous, amid reports that the government has reduced the allocation for Startup India programme in the Budget 2019-20 but added more monies to the Make in India kitty. According to the budget documents, the allocation for Startup India programme has been slashed to Rs 25 crore for 2019-20 from the revised estimate of Rs 28 crore in 2018-19. Sentiments also got hit with a private report stating that public sector investments are expected to grow at a much slower pace in 2019-20, as capital outlay by public sector enterprises is expected to remain at almost the same level as 2018-19, while capital spending by the Centre is budgeted to grow at a much slower pace next year. The trade remained lackluster for the most part of the session, as Fitch Solutions, the research arm of Fitch Group, also projected the government's fiscal deficit to overshoot the budgeted target by 0.2 percent to 3.6 percent of GDP in 2019-20 fiscal. It said that 2019-20 Budget appears to show a strong populist bent in the run up to the General election due by May 2019. Adding anxiety among the investors, the commerce and industry ministry data showed that foreign direct investment (FDI) into India has declined 11 percent to $ 22.66 billion during April-September period of the current fiscal. The foreign fund inflows during April-September 2017-18 stood at $ 25.35 billion. However, in the last leg of the trade, the key indices recovered from losses to end higher, supported by Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta's statement that the new online National Logistics Portal (NLP) and forthcoming national policy would help boost India's export growth. Finally, the BSE Sensex gained 113.31 points or 0.31% to 36,582.74, while the CNX Nifty was up by 18.60 points or 0.17% to 10,912.25.

 

The US markets settled higher on Monday, with Nasdaq ending higher over one percent, as investors looked ahead to another week of high-profile earnings and developments in US-China trade talks. Stocks continue to benefit from a dovish Federal Reserve after the central bank last week signaled rate increases were on hold until further notice. US-China trade talks will remain in focus as a March 1 deadline to avoid an increase on tariffs on Chinese imports looms. Upbeat comments by US and Chinese have been credited with supporting stocks. Besides, markets continued to benefit from recent upward momentum as well as the positive sentiment generated by last Friday's monthly employment report showing much stronger than expected job growth in the month of January. On the economic front, reflecting a steep drop in orders for non-durable goods, the Commerce Department released a report showing new orders for US manufactured goods unexpectedly decreased in the month of November. The Commerce Department said factory orders fell by 0.6 percent in November after jumping by 2.1 percent in October. The unexpected drop in factory orders came as orders for non-durable goods slumped by 1.9 percent in November after inching up by 0.1 percent in the previous month. Meanwhile, the report said durable goods orders climbed by 0.7 percent in November after plummeting by 4.3 percent in October. Orders for transportation equipment led the rebound, surging up by 3.0 percent in November after plunging by 12.4 percent in October. Dow Jones Industrial Average surged 175.48 points or 0.70 percent to 25239.37, S&P 500 gained 18.34 points or 0.68 percent to 2724.87 and Nasdaq was up by 83.67 points or 1.15 percent to 7347.54.

 

Crude oil futures ended lower on Monday after briefly touching their highest intraday levels of the year, with prices giving up some of the gains they scored last week as concerns over a potential slowdown in energy demand resurfaced. Demand concerns were reignited following the release of surprisingly weak Chinese and US economic data, and as a result, futures gave back all of last week's gains. Surprisingly soft Chinese General Services PMI for January released overnight, which showed the Composite level dip to 50.9 from 52.2 in December. Benchmark crude oil futures for March declined 70 cents or 1.3 percent to settle $54.56 a barrel on the New York Mercantile Exchange. April Brent crude fell 24 cents or 0.4 percent to settle at $62.51 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended considerably weaker against the US dollar on Monday, on fresh bouts of dollar demand from importers. The rupee came under pressure due to extremely bullish dollar sentiment overseas.  Market participants also remained worried on Moody's Investors Service's statement that the government will find it difficult to meet the fiscal deficit target of 3.4% in 2019-20 on account of higher spending and low revenue growth. Observing that Indian government's debt is stubbornly high as a percentage of GDP, Moody's said it could be brought down only if the Centre sticks to the fiscal consolidation path. Adding anxiety among the investors, the commerce and industry ministry data showed that FDI into India has declined 11 percent to $ 22.66 billion during April-September period of the current fiscal. On the global front, dollar edged higher on Monday, breaking a two-week losing streak as strong US jobs data propped up the greenback in a market broadly cautious on the outlook for risky assets. Finally, the rupee ended at 71.80, 55 paise weaker from its previous close of 71.25 on Friday.

 

The FIIs as per Monday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 7172.82 crore against gross selling of Rs 5966.15 crore, while in the debt segment, the gross purchase was of Rs 1153.95 crore with gross sales of Rs 672.41 crore. Besides, in the hybrid segment, the gross selling was of Rs 0.28 crore against no buying.

 

The US markets rose on Monday, led by the technology sector, as investors awaited another busy week of corporate earnings reports and economic data. The Japanese stock market is trading in red on Tuesday, while most of the other Asian markets are closed for the Lunar New Year holiday. Extending gains for third straight session, Indian markets settled higher on Monday, led by gains in heavyweight Reliance Industries. Today, the markets are likely to make slightly positive start tacking overnight gains on Wall Street. Traders will be looking ahead to the six-member Monetary Policy Committee (MPC) headed by Reserve Bank of Indian (RBI) Governor Shaktikanta Das three-day meet to be start on February 05 and announce the policy on February 07. Traders will be getting encouragement with Union Commerce Secretary Anup Wadhawan's statement that the country's exports in the current fiscal year are expected to surpass the earlier peak of $314 billion in 2013-14. He added that the achievement comes against the backdrop of a very challenging global environment. Meanwhile, the government has decided to form a small working group to look into the issue of angel tax being faced by startups and come out with a workable solution in 4-5 days. However, there may be some cautiousness with the government data showing that fiscal deficit touched 112.4% of the full-year budget target of Rs 6.24 lakh crore at the end of December on account of lower revenue collections. The fiscal deficit, or gap between Government's expenditure and revenue, stood at Rs 7.01 lakh crore during April-December of the current financial year which ends in March. Traders may take note of a SBI research report stating that the RBI may cut key lending rate by 0.25 percent later this week in view of benign inflation. They expect RBI to change its stance in February, but it is likely to remain on a pause mode. The first cut might happen in April 2019, but they believe it will be shallow rate cut cycle. There will be some buzz in the telecom sector stocks with report that telecom firms, barring Reliance Jio, have asked the government to waive GST on spectrum payments and other levies, while adjusting accumulated tax credits of Rs 35,000 crore in the pending payments. There will be some reaction in sugar industry stocks with Indian Sugar Mills Association (ISMA) stating that sugar production rose 8% to 185 lakh tonnes in the first four months of this marketing year ending September, while cautioning that cane arrears to farmers could reach very uncomfortable levels.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,912.25

10,841.63

10,955.38

BSE Sensex

36,582.74

36,331.22

36,728.51

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

607.72

179.80

175.37

184.47

ZEEL

250.98

347.75

330.58

363.43

Vedanta

245.79

161.35

156.90

165.40

SBI

206.43

283.95

279.47

286.82

ICICI Bank

170.39

354.55

348.07

358.97

 

  • Hero MotoCorp has reported sales of 582,756 units for the month of January 2019. 
  • SBI has signed a MoU with MG Motor India to provide wholesale inventory finance to MG Motor dealers through bank's technologically-advanced electronic lending product. 
  • Bajaj Auto has registered a rise of 15% in total sales to 407,150 units in January 2019 against 353,147 units in January 2018. 
  • HCL Technologies has opened a new office in The Hague, expanding its presence in the Netherlands.
News Analysis