NSE Intra-day chart (13 July 2018)
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Market Commentary 16 July 2018
Markets to make slightly negative start ahead of WPI data

 

Snapping five days of winning streak, Indian equity benchmarks ended the Friday's trade slightly in red terrain, as traders opted to book profit ahead of information technology (IT) heavyweight Infosys June quarter earnings. Markets started the session on an optimistic note with traders getting some encouragement from Finance Minister Arun Jaitley's statement that India could soon emerge as the world's fifth largest economy if it continues to maintain its current pace of growth. Soon traders turned cautious on account of disappointing macroeconomic data. India's retail inflation surged to five-month high of 5% in June 2018, for the third straight month, as compared to 4.87% in May, while India's industrial production measured by Index of Industrial Production (IIP) declined to a seven-month low of 3.2% in the month of May 2018, as compared to a revised 4.8% growth in April. Some cautiousness also crept in with Organisation for Economic Cooperation and Development's (OECD) statement that big emerging economies like China and India will suffer more than developed countries if trade tariffs return to 1990 levels. Sentiments also remained pessimistic on report that the UK government's latest blueprint for Brexit released July 12 threatens to derail plans for closer trade ties with India as it would prevent Britain from making the kind of concessions on trade in goods. Anxiety also prevailed with Reserve Bank of India's report stating that loan waivers have reduced burden on the farmers but there may be no visible benefits to the overall economy. Traders also took note of Niti Aayog vice chairman Rajiv Kumar's statement that emergence of India as the sixth largest economy was very much expected but still there is a long way to go as the per capita income of the country is still low. Meanwhile, the government has set up a high-level task force under the chairmanship of Cabinet Secretary P K Sinha. The move assumes importance as India is highly dependent on imports of several items such as oil, electronic hardware, machinery, ingredients for pharmaceuticals, gold and chemicals. Finally, the BSE Sensex slipped 6.78 points or 0.02% to 36,541.63, while the CNX Nifty was down by 4.30 points or 0.04% to 11,018.90.

 

The US markets end slightly higher on Friday with major indexes extending a recent rally and the Dow reclaiming the 25,000 mark for the first time in nearly a month. Markets wobbled in morning trading, but rising oil prices helped energy companies, and defense contractors and machinery makers also rose. Consumer-focused companies like Amazon set record highs. Traders were also digesting mixed quarterly results from financial giants JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC). Some support came in with the Federal Reserve delivering its semi-annual monetary policy to Congress, offering few surprises. The Fed described economic growth in the first half of the year as solid and reiterated it expects further gradual increases in interest rates. The Federal Reserve remains positive on the US economic outlook with barely any mention of the trade or yield curve worries that are preoccupying markets. Meanwhile, the University of Michigan released a report showing an unexpected decrease in consumer sentiment in the month of July on account of concerns about potential impact of tariffs. The preliminary report said the consumer sentiment index dipped to 97.1 in July from the final June reading of 98.2. Besides, a separate report released by the Labor Department showed an unexpected decrease in import prices in the month of June but a slightly bigger than expected increase in export prices. The Dow Jones Industrial Average gained 94.52 points or 0.38 percent to 25019.41, the S&P 500 added 3.02 points or 0.11 percent to 2801.31 and the Nasdaq was up by 2.06 points or 0.03 percent to 7825.98.

 

Crude oil futures ended higher on Friday, but posted sharp losses for the week, as traders weighed concerns over resurgent Libyan supply and global trade disputes against indications of tighter crude supply and shrinking spare output capacity. Market participants have been concerned by further trade tensions between China and the U.S. Such worries outweighed a report from the Energy Information Administration, which said weekly U.S. crude supplies dropped by 12.6 million barrels in the week ended July 6 and stand at about 4% below the five-year average for this time of year. A report from the International Energy Agency suggested that global spare production capacity could be pushed to its limit. Benchmark crude oil futures for August rose 68 cents or 1 percent to settle at $71.01 a barrel on the New York Mercantile Exchange. September Brent crude surged 88 cents or 1.2 percent at $75.33 a barrel on London's Intercontinental Exchange.

 

Indian rupee shed most of its early gains but still ended higher against the American currency on Friday, due to selling of the US currency by exporters and banks. Traders took some support with Finance Minister Arun Jaitley's statement that India could soon emerge as the world's fifth largest economy if it continues to maintain its current pace of growth. However, gains remained capped as traders turned cautious on account of disappointing macroeconomic data. India's retail inflation surged to five-month high of 5% in June 2018, for the third straight month, as compared to 4.87% in May, while India's industrial production measured by Index of Industrial Production (IIP) declined to a seven-month low of 3.2% in the month of May 2018, as compared to a revised 4.8% growth in April. On the global front, Sterling fell on Friday as a resurgent dollar and comments by President Donald Trump that a possible US-British trade deal was probably dead sapped demand for the pound. Finally, the rupee ended at 68.54, 3 paise stronger from its previous close of 68.57 on Thursday.

 

The FIIs as per Friday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3925.56 crore against gross selling of Rs 4868.00 crore, while in the debt segment, the gross purchase was of Rs 345.62 crore with gross sales of Rs 1390.75 crore. Besides in the hybrid segment, the gross selling was of Rs 0.98 crore against no buying.

 

The US markets ended slightly higher on Friday, as traders seemed reluctant to make significant moves on the heels of the considerable volatility seen over the past few sessions. Asian markets were trading mostly in red in early deals on Monday, ahead of the release of a barrage of China economic data due later in the day. Indian equity markets ended Friday's session marginally in lower, on account of disappointing macroeconomic data. Today, the markets are likely to make flat-to-negative start, ahead of the release of crucial wholesale price index (WPI) inflation data later in the day coupled with more corporate earnings this week. There will be some cautiousness with the commerce ministry's data showing that India's trade deficit widened to its highest level in more than five years in June, driven largely by a surge in oil prices and a weaker rupee. The trade deficit widened to $16.6 billion from $14.62 billion in May, though merchandise exports rose 17.57% year-on-year in June, on account of healthy growth in sectors such as petroleum and chemicals, while imports rose 21.31% to $44.3 billion during the month. Also, there will be negative reaction on the Reserve Bank of India's data that the country's foreign exchange reserves declined by $248.20 million to $405.81 billion in the week to July 6, despite a rise in the foreign currency assets. Meanwhile, continuing their selling spree, foreign investors have pulled out nearly Rs 1,200 crore from the debt markets in the first two weeks of the month on higher fuel prices and possibilities of rate hike by the US Federal Reserve. However, traders may get some support later in the day with Economic Affairs Secretary Subhash Chandra Garg's statement that the Indian economy is at a take off stage and is expected to be the world's third largest by 2030 with GDP worth $10 trillion. Some support may also come with the Union Minister Arun Jaitley exuding confidence that India will pip Great Britain to become the fifth largest economy in the world next year if economic expansion continues at the projected rate. Meanwhile, Finance Minister Piyush Goyal has said that the Centre is looking at simplify the companies law to provide relief to businesses. There will be some buzz in public sector banks (PSBs) stocks with report that the finance ministry may approach markets regulator SEBI to seek relaxation on the minimum 25% public shareholding norm for some PSBs.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,018.90

10,988.65

11,060.25

BSE Sensex

36,541.63

36,448.80

36,687.26

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank

191.60

267.75

264.77

272.02

ITC

185.90

270.40

266.97

276.07

Reliance Industries

179.67

1,099.80

1,083.53

1,112.53

Yes Bank

154.49

376.00

368.77

381.77

IOC

136.90

159.10

156.45

161.05

 

  • L&T's construction arm -- L&T Construction -- has won orders worth Rs 3,000 crore. 
  • Ashok Leyland in partnership with HPCL has unveiled eN-Dhan fuel card. 
  • NTPC has signed a term loan agreement with HDFC Bank for availing a loan of Rs 1,500 crore. 
  • Infosys has reported a rise of 3.70% in its consolidated net profit at Rs 3,612 crore for Q1FY19 as compared to Rs 3,483 crore for Q1FY18.
News Analysis