NSE Intra-day chart (08 February 2019)
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Market Commentary 11 February 2019
Benchmarks to make a weak start amid mixed global cues

 

Friday turned out to be a horrendous day of trade for Indian equity benchmarks with frontline gauges losing over a percent, breaching their crucial 11,000 (Nifty) and 36,600 (Sensex) levels. Sentiments remained dampened since start of the trade as traders remained wary on renewed concerns over US-China trade tiff. Traders failed to take any sense of relief 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. Traders also shrugged off report that 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. Markets extended losses as sentiment remained dull with disappointing third quarter number by Tata Motors. The company reported a consolidated net loss of Rs 26,960 crore for the third quarter of this fiscal due to asset impairment in its British arm Jaguar Land Rover (JLR). Domestic indices added losses to end near intraday low points, as sentiment on the street weakened further with report that India is unlikely to achieve its target of 100 gigawatt (GW) solar electricity capacity as it faces short-term uncertainty due to imposition of various taxes. Meanwhile, the RBI has increased the limit of collateral-free agricultural loans to Rs 1.6 lakh from the current limit of Rs 1 lakh. Earlier, in 2010, the collateral-free limit for crop loans and term loans was hiked to Rs 1 lakh from Rs 50,000. Keeping in view the overall inflation and rise in agriculture input costs since then, the RBI has decided to raise the limit for collateral-free agriculture loans to Rs 1.6 lakh. Finally, the BSE Sensex fell 424.61 points or 1.15% to 36,546.48, while the CNX Nifty was down by 125.80 points or 1.14% to 10,943.60.

 

The US markets settled mostly higher on Friday, but The Dow Jones Industrial Average ending lower amid lingering concerns about a potential trade deal between the US and China. Adding to the worries, a report which said that the US and China do not even have a draft accord that specifies where they agree and disagree. The report comes after President Donald Trump said that he would not meet with Chinese President Xi Jinping before a crucial March deadline. Tariffs on Chinese goods are currently set to jump automatically on the deadline. Besides, Trump is expected to sign an executive order next week banning Chinese wireless equipment from US networks ahead of the MWC Barcelona conference at the end of this month. The move was aimed at protecting the US from cyber threats. Nagging global growth worries also weighed on the markets with investors concerned that China's slowdown has hit Europe after weak data and forecasts from the region. S&P 500 gained 1.83 points or 0.07 percent to 2707.88 and Nasdaq was up by 9.85 points or 0.14 percent to 7298.20, while Dow Jones Industrial Average dropped 63.20 points or 0.25 percent to 25106.33.

 

Crude oil futures ended marginally higher on Friday but suffering a weekly loss of nearly 5%. The decline in oil prices this week came on account of worries about energy demand, a stronger dollar that makes US-priced commodities less attractive, and reports that Libya could soon increase production. China-US trade uncertainty and a vulnerable stock market were adding to the worrisome economic picture.  The weekly drop was also fueled as 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. Benchmark crude oil futures for March added 8 cents or 0.2 percent to settle $52.72 a barrel on the New York Mercantile Exchange. April Brent crude rose 47 cents or 0.8 percent to settle at $62.10 a barrel on London's Intercontinental Exchange.

 

Rising for the fourth straight day, Indian rupee ended stronger against dollar on Friday, owing to dollar sale by exporters and banks. Sentiments remained positive 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. Local unit also found some support with report that 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. However, dollar's strength against major global currencies overseas along with the weak trade in the local equity market capped the rupee's gain. On the global front, Pound came under pressure after Bank of England held rates unchanged and expects the economy to face its weakest economic growth in a decade this year as uncertainty over Brexit mounts and the global economy slows. Finally, the rupee ended at 71.31, 14 paise stronger from its previous close of 71.45 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 3468.40 crore against gross selling of Rs 3069.47 crore, while in the debt segment, the gross purchase was of Rs 1335.18 crore with gross sales of Rs 1846.69 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.55 crore against gross selling of Rs 0.04 crore.

 

The US markets ended mixed on Friday amid worries about ongoing US-China trade negotiations as well as slowing economic growth. The Asian markets were trading mixed on Monday as worries about global growth, US politics and the ongoing Sino-US tariff war kept investors cautious. Indian markets ended sharply lower on Friday led by heavy losses in Tata Motors and renewed concerns over US-China trade tiff. Today, the start of new week is likely to be weak amid mixed global cues. Traders will be concerned about the International Monetary Fund warning governments to gear up for a possible economic storm as growth undershoots expectations. It said the bottom-line they see an economy that is growing more slowly than they had anticipated. There will be some cautiousness with asserting India's fast economic growth is not without generation of jobs, Economic Affairs Secretary Subhash Chandra Garg said the country actually faces shortage of capital more than the scarcity of jobs.  However, traders may take some support later in the day with the Reserve Bank of India's (RBI) data showing that the country's foreign exchange reserves increased by $2.063 billion to $400.24 billion in the week to February 1, on account of rise in foreign currency assets. Some support may also come with report that the government has collected Rs 7.88 trillion from direct taxes in the first ten months of the current financial year. Besides, the commerce ministry said India's exports to China has reached $12.7 billion during April-December 2018 on account of growth in shipments of marine products, chemicals, plastics, petroleum products, grapes and rice. Meanwhile, the finance ministry has sought from the Reserve Bank of India (RBI) Rs 27,380 crore that was withheld by the central bank towards risks and reserves in the previous years.  There will be some reaction in banking sector stocks with the government's statement that bad loans of public sector banks declined by more than Rs 31,000 crore to Rs 8,64,433 crore in the first nine months of the current fiscal as compared to end of March 2018. There will be some buzz in the power sector stocks with a recent ASSOCHAM-Grant Thornton joint study stating that investments worth over Rs 2.5 lakh crore in thermal sector projects, based on domestic coal, imported coal, and gas, are facing stress and immediate remedial measures need to be undertaken to ensure that they are revived in a time-bound manner. Also, there will be some reaction in micro, small and medium enterprises (MSMEs) stocks with report that the RBI's restructuring package for small businesses announced last month will help recast Rs 1 trillion of loans for 700,000 eligible MSMEs. 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

10,943.60

10,898.97

11,014.72

BSE Sensex

36,546.48

36,389.54

36,794.50

           

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Motors

1,022.57

150.70

131.60

167.20

Yes Bank

325.62

175.10

172.73

177.98

Vedanta

216.67

154.15

148.43

161.13

SBI

197.82

286.00

282.80

288.60

Indiabulls Housing Finance

141.76

613.90

591.95

648.90

 

  • Tata Motors' wholly owned subsidiary - JLR has reported 10.9% fall in global vehicle sales to 43,733 units in January, hit by tough market conditions in China.
  • Tech Mahindra and Scandinavian IT firm KMD have extended their business partnership for another four years. 
  • Coal India is fast tracking the process of procuring 360 high capacity mining equipment valued at over Rs 7000 crore to boost production. 
  • M&M has reported a fall of 11.44% in its net profit at Rs 1,076.81 crore for Q3FY19 as compared to Rs 1,215.89 crore for Q3FY18.
News Analysis