NSE Intra-day chart (07 February 2019)
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Market Commentary 08 February 2019
Benchmarks to make a cautious start amid weak global cues

 

The Reserve Bank of India's (RBI) the policy repo rate failed to enthuse Indian equity benchmarks on Thursday, as both the larger peers, Sensex and Nifty, settled the day almost flat. RBI in its sixth bi-monthly monetary policy review of 2018-19, has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.50% to 6.25% with immediate effect. The RBI also decided to change the monetary policy stance from calibrated tightening to neutral. The start of the day was firm, aided by Moody's Investors Service's statement that the tax relief steps for the middle-class and direct cash transfer programme for farmers will give a fiscal stimulus of about 0.45% of Gross Domestic Product (GDP), and support growth through increased consumption over the near term, albeit at a fiscal cost. Some support also came with report that the government allowed export of bio-fuels from special economic zones (SEZs) and export-oriented units (EoUs) with certain conditions. In August 2018, the government imposed restrictions on export of bio-fuels for non-fuel purposes. In the second half of the session, the markets turned volatile and erased all of their gains to end the trading session flat, tracking weak global markets. Anxiety spread among the traders, after RBI raised concerns that in spite of soft crude oil prices and the lagged impact of the recent depreciation of the Indian rupee on net exports, slowing global demand could pose headwinds and added that in particular, trade tensions and associated uncertainties appear to be moderating global growth. The market participants paid no heed towards reports that the commerce ministry proposed several measures such as setting up of a separate fund, single-window e-marketplace and a law to define the role of various stakeholders, as part of the draft national logistics policy. The street also overlooked a report stating that the government decided to raise additional Rs 36,000 crore through dated securities during the current financial year (FY19), with an aim to meet additional expenses. The government will borrow additional Rs 36,000 crore through two tranches of Rs 18,000 crore each during March 11-15 and March 18-22. Finally, the BSE Sensex fell 4.14 points or 0.01% to 36,971.09, while the CNX Nifty was up by 6.95 points or 0.06% to 11,069.40.

 

The US markets ended in red on Thursday as slashed European growth forecasts and warnings on the US-China trade dispute weighed on the sentiments. Renewed concerns about a US-China trade deal generated selling pressure after a report that President Donald Trump and Chinese President Xi Jinping are highly unlikely to meet before a March 02 deadline. The report comes after White House economic adviser Larry Kudlow told Fox Business the US and China have a pretty sizable distance to go before reaching a trade deal. Besides, worries about the US-China trade talks added to concerns about the global economy raised by the European Commission lowering its eurozone growth forecast. The European Commission slashed its GDP growth forecast for 2019 to 1.3% from 1.9% and lowered its estimate for growth in 2020 to 1.6% from 1.7%. The downgrade reflected external factors, such as trade tensions and the slowdown in emerging markets, notably in China. On the economic front, first-time claims for US unemployment benefits pulled back in the week ended February 02 after the jump seen in the previous week, according to a report released by the Labor Department. The report said initial jobless claims fell to 234,000, a decrease of 19,000 from the previous week's unrevised level of 253,000. Street had expected jobless claims to drop to 221,000. The smaller-than-expected decrease came after jobless claims rebounded to their highest level since September of 2017 in the previous week. The Labor Department said the less volatile four-week moving average rose to 224,750, an increase of 4,500 from the previous week's unrevised average of 220,250. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, slid by 42,000 to 1.736 million in the week ended January 26. Dow Jones Industrial Average dropped 220.77 points or 0.87 percent to 25169.53, S&P 500 declined 25.56 points or 0.94 percent to 2706.05 and Nasdaq was down by 86.93 points or 1.18 percent to 7288.35.

 

Crude oil futures settled lower on Thursday after the European Commission slashed growth forecasts for the eurozone and its major economies sharply for 2019 and 2020, further stoking concerns of a global growth slowdown.  Further, the decline in oil came on reports that Libya could soon increase production. Libyan general took control of the country's largest oil field, the Sharara, raising the likelihood the facility will restart production. The added supply could bring more oil to the global market and put downward pressure on prices. The Sharara facilities, which can pump roughly 315,000 barrels a day of crude, were shut down late in 2018 after a group of armed gunmen took control of the field demanding better living conditions in the region. Benchmark crude oil futures for March dropped $1.37 or 2.5 percent to settle $52.64 a barrel on the New York Mercantile Exchange. April Brent crude declined $1.06 or 1.7 percent to settle at $61.63 a barrel on London's Intercontinental Exchange.

 

Rising for the third straight session, Indian rupee ended marginally higher against dollar on Thursday, on persistent selling of the American currency by exporters. Market participants got some comfort after the RBI's Monetary Policy Committee (MPC) lowered the repo rate by 25 basis points to 6.25 percent. The MPC changed the policy stance to neutral from calibrated tightening. It also pegged H1 FY20 (April-September) inflation at 3.2-3.4 percent, assuming a normal monsoon. Some support came with Moody's Investors Service's statement that the direct cash transfer programme for farmers and tax relief steps for the middle-class will give a fiscal stimulus of about 0.45 percent of GDP, and support growth through increased consumption, though at a fiscal cost. On the global front, euro weakened on Thursday after data showed Germany's economy slowed in December, underscoring fears about a broader slump in Europe.  Finally, the rupee ended at 71.45, 11 paise stronger from its previous close of 71.56 on Wednesday.

 

The FIIs as per Thursday'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 4468.47 crore against gross selling of Rs 3375.74 crore, while in the debt segment, the gross purchase was of Rs 88.86 crore with gross sales of Rs 360.49 crore. Besides, in the hybrid segment, the gross selling was of Rs 0.52 crore against no buying.

 

The US markets ended sharply lower on Thursday as trade tensions and bleak economic data from Europe renewed fears of a slowdown in global growth. Asian markets are trading in red on Friday as investors fretted about a broadening global economic slowdown. Erasing most of the early gains, Indian markets ended almost flat on Thursday after the Reserve Bank of India (RBI) unexpectedly cut the repo rate by 0.25% to 6.25%, saying inflation will likely stay within its target range. Today, the start of the session is likely to be cautious amid global growth concerns. However, some support may come later in the day with Finance Minister Piyush Goyal's statement that the rate cut by the RBI will give a boost to the economy by providing affordable credit to small businesses and homebuyers. The RBI has reduced repo rate (at which RBI lends to banks) by 0.25% to 6.25%, a move that will translate into softening interest rates. Besides, welcoming the RBI's decision, Economic Affairs Secretary Subhash Chandra Garg said it is a very balanced and pragmatic policy statement. Meanwhile, India has jumped eight places to 36th position on the International Intellectual Property (IP) Index, which analyses the IP climate in 50 global economies, this year. India's eight-point jump in 2019 from 44th position in 2018 is the highest increase among 50 nations mapped by the index. The report said the improvement reflects important reforms implemented by Indian policy-makers towards building and sustaining an innovation ecosystem for domestic entrepreneurs and foreign investors alike. Besides, a report stated that as many as 21 firms including Religare Enterprises, Reliance Naval and Engineering, and Binani Industries have come under short-term additional surveillance measure (ASM) framework of the NSE. Under the short-term ASM framework, NSE said the applicable rate of margin is fixed at 1.5 times the existing margin or 40%, whichever is higher, subject to maximum rate of margin capped to 100%. There will be some buzz in the aviation sector stocks with an International Air Transport Association (IATA) report stating that there is an 18.6% annual increase in domestic aviation sector considering the rise in Indians preferring to fly across the country last year. Also, there will be some reaction in non-banking finance companies (NBFCs) stocks with report that the RBI has decided to assign risk weights for the rated exposures of banks to all NBFCs to facilitate credit flow to the sector that is reeling under liquidity pressure post IL&FS defaults in August. There will be lots of earnings reaction based on the performance of the companies.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,069.40

11,035.97

11,110.47

BSE Sensex

36,971.09

36,855.87

37,129.25

           

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

444.95

176.95

174.20

180.75

SBI

197.33

287.40

284.67

292.07

Sunpharma

181.87

434.90

422.07

446.77

Tata Motors

161.53

182.85

179.50

185.60

ZEEL

150.12

408.75

392.67

418.17

 

  • Coal India has supplied 407.02 MT coal to power sector during current year up to February 4, 2019, thereby achieving a growth of 7.3% over the same period of last year. 
  • Yes Bank has signed a MoU with MG Motor India to offer financing and banking solutions to both the MG Motor dealers as well as the end consumers. 
  • Bharti Airtel has further upgraded its 4G network in Punjab with the deployment of LTE 900 technology.  
  • Tata Motors has reported a consolidated net loss of Rs 26,992.54 crore for Q3FY19 against net profit of Rs 1,198.63 crore for Q3FY18.
News Analysis