NSE Intra-day chart (16 August 2018)
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Market Commentary 17 August 2018
Markets to make flat-to-negative start of the last trading day of week

 

Selling in last hour of trade dragged benchmarks near intraday low levels, to settle below their crucial 37,700 (Sensex) and 11,400 (Nifty) marks. Markets started the session on a pessimistic note, as cautiousness crept in with report that India's trade deficit soared to a near five-year high of $18 billion. The commerce ministry data showed that the country's exports rose by 14.32% to $25.77 billion in July mainly on account of better performance of gems and jewellery sector as well as petroleum products, while imports during July were valued at $43.79 billion, a growth of 28.81% compared to $33.99 billion in the year ago period. Traders also remained concerned on India Ratings' report that if the steep decline in the household savings rate -- which has fallen to 16.3% from 23.6% between fiscals 2012 and 2017 -- continues, it may pose a serious challenge to overall growth and the macroeconomic stability. However, market witnessed a decent recovery and pared all of their losses to enter into green terrain as traders took some encouragement with FICCI's latest Economic Outlook Survey stated that the Indian economy is expected to grow at 7.4% in the current fiscal, higher than the previous year. Some support also came with Prime Minister Narendra Modi's statement that structural reforms of four years by his government have transformed the Indian economy from being among world's fragile five to an elephant that has started to run and made it a destination of multi-trillion dollar investment. But, recovery proved short-lived and markets once again came back in red terrain and selling in metal and basic materials dragged markets near intraday low levels. Traders remain concerned on report that India's crude oil import bill is likely to jump by about $26 billion in 2018-19 as rupee dropping to a record low has made buying of oil from overseas costlier. Meanwhile, Union Minister Arun Jaitley said that India has comfortable foreign exchange reserves to deal with any undue volatility in the currency market and developments are being closely monitored. Finally, the BSE Sensex shed 188.44 points or 0.50% to 37,663.56, while the CNX Nifty was down by 50.05 points or 0.44% to 11,385.05.

 

The US markets ended higher on Thursday, with the Dow having its best day in four months, following a report that China has accepted an invitation from the US for a new round of trade talks to be held in late August. China's Ministry of Commerce said that a Chinese delegation led by Vice Commerce Minister Wang Shouwen will travel to the US for trade talks to be held with US Under Secretary of Treasury for International Affairs David Malpass. Further, some support also came on strong corporate earnings from Walmart Inc. and Cisco Systems Inc. Besides, second-quarter earnings growth of 24.8% was the best since 2004 - excluding the postrecession rebound in 2010. On the economic front, the Labor Department released a report showing first-time claims for unemployment benefits unexpectedly edged lower in the week ended August 11. The report said initial jobless claims dipped to 212,000, a decrease of 2,000 from the previous week's revised level of 214,000. Meanwhile, a separate report from the Commerce Department showed new residential construction rebounded by much less than expected in the month of July. The report said housing starts rose by 0.9% to an annual rate of 1.168 million in July after plunging by 12.9% to a revised rate of 1.158 million in June. Dow Jones Industrial Average surged 396.32 points or 1.58 percent to 25558.73, the S&P 500 gained 22.32 points or 0.79 percent to 2840.69 and Nasdaq was up by 32.41 points or 0.42 percent to 7806.52.

 

After a sharp fall in previous session, Crude oil futures ended higher on Thursday as China said it would send a delegation to the US later this month to resume trade talks, while also flagging China's efforts to boost infrastructure investment projects in an effort to boost its economy. Meanwhile, the latest surge in US-Turkey tension elevates the likelihood that Turkey will continue to import Iranian oil after November in defiance of US sanctions on Iran. Turkey is one of the largest importers of Iranian oil, and would join China as two key countries not expected to reduce imports once US sanctions enter full effect. Benchmark crude oil futures for September rose 45 cents or 0.7 percent to settle at $65.46 a barrel on the New York Mercantile Exchange. October Brent crude gained 67 cents or nearly 1 percent at $71.43 a barrel on London's Intercontinental Exchange.

 

Breaching the psychological 70 per dollar mark, Indian rupee ended at record low closing level against dollar on Thursday, hurt by fresh demand for the American currency from importers. The rupee sentiments were hit on report that India's trade deficit soared to a near five-year high of $18 billion. The commerce ministry data showed that the country's exports rose by 14.32% to $25.77 billion in July mainly on account of better performance of gems and jewellery sector as well as petroleum products, while imports during July were valued at $43.79 billion, a growth of 28.81% compared to $33.99 billion in the year ago period. Additionally, a firm dollar against some global currencies overseas along with sharp losses in the local equities also pressurized the sentiments. However, the local currency recovered from its all-time low of 70.40 to come off day's lows, as some optimism remained among the traders with FICCI's latest Economic Outlook Survey stating that the Indian economy is expected to grow at 7.4% in the current fiscal, higher than the previous year. On the global front, euro recovered on Thursday from its weakest since late June 2017 and the dollar fell after news that a Chinese delegation will travel to the United States for trade talks, with investors buying back into currencies hit hard in the recent sell-off. Finally, the rupee ended at 70.16, 27 paise weaker from its previous close of 69.89 on Tuesday.

 

The FIIs as per Thursday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3942.36 crore against gross selling of Rs 4313.62 crore, while in the debt segment, the gross purchase was of Rs 637.90 crore with gross sales of Rs 741.14 crore. Besides, in the hybrid segment, the gross selling was of Rs 7.91 crore against no buying.

 

The US markets ended higher on Thursday on renewed hope that a resolution to a trade dispute with China could be on the horizon. Investors also took some support with upbeat quarterly results and stabilizing commodities prices. Asian markets were trading in green in early trade on Friday after China and the United States agreed to hold their first trade talks since June next week and as the Turkish lira extended gains from its record low earlier this week. Indian equity markets settled in negative territory on Thursday following weak global cues on concerns over Turkey's financial crisis coupled with widening India's trade deficit and weakness in rupee. Today, the markets are likely to make a flat-to-negative start as there will be some cautiousness with report that India Ratings & Research revised down its growth estimate for Indian economy to 7.2% from its earlier projection of 7.4% for 2018-19. The downward revision comes as the rating agency expects Indian economy to face headwinds from high crude oil prices, increase in minimum support prices of kharif crops, rising trade protectionism, depreciating currency. Also, there will be negative reaction on a report that investments through participatory notes into Indian capital markets plunged to over nine-year low of Rs 80,341 crore till July-end amid stringent norms put in place by the watchdog Sebi to check misuse of these instruments. Traders will also be concerned about industry chamber Assocham's statement that Indian economy would be able to absorb the rupee depreciation in the range of Rs 69-71 range to a dollar but anything above that level would have negative impact on inflation, country's import bill and would consequently impact the trade deficit. There will be some reaction among the banking sector stocks with the RBI's latest data showing that bank credit grew 12.70% to Rs 86,79,741 crore in the fortnight to August 3, while in the year-ago fortnight, bank advances was at Rs 77,01,926 crore. There will be buzz in the steel sector stocks with a report that the falling rupee will adversely impact the domestic steel sector as import of various raw materials will become expensive and the cost of servicing debt would also go up.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,385.05

11,350.92

11,434.52

BSE Sensex

37,663.56

37,567.82

37,825.61

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank

374.64

334.30

328.97

339.42

SBI

310.84

292.70

289.17

297.32

Sun Pharma

251.69

619.70

607.37

626.87

Axis Bank

187.77

623.45

611.47

635.22

ITC

186.74

307.45

305.53

308.93

 

  • Sun Pharma including its subsidiaries and/or associate companies has received approval for CEQUA 0.09%, from the USFDA. 
  • Reliance Industries' subsidiary -- Reliance Brands -- has purchased an additional 12.56% equity shareholding in GCL for about Rs 52.77 crore, taking its total stake in GCL to 46.39%. 
  • NTPC will soon set up a subsidiary to handle its coal mining operations and also plans to enter commercial coal mining after meeting its requirement. 
  • Maruti Suzuki India has increased prices of its models owing to rise in commodity and distribution costs and adverse foreign exchange rates.
News Analysis