NSE Intra-day chart (17 December 2018)
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Market Commentary 18 December 2018
Benchmarks to make negative start amid selloff in global markets

 

Monday turned out to be Marvelous day for the Indian equity benchmarks, as Sensex and Nifty ended the trading day in green for fifth straight session. The key indices made a great start of the week, aided by commerce ministry's latest data report showing that India's exports grew by a meager 0.80% to $26.5 billion in November, even as the trade deficit widened to $16.67 billion. Exporters attributed the marginal export growth in November to high base effect, as the foreign shipments in the comparable month of the previous fiscal were quite high at $26.29 billion. Besides, imports rose by 4.31% to $43.17 billion during the month. Adding some enthusiasm, the Finance Minister Arun Jaitley said that the government will stick to the 3.3% fiscal deficit target in the current financial year. He also said India will clock a growth rate of 7-8% despite global uncertainties and will retain the tag of the world's fastest growing major economy. Some comfort also came with deputy governor Viral Acharya's statement that the Reserve Bank prefers fundamental changes to smoothen loan flow to micro-businesses through a public credit registry, rather than doling out forbearances. Rally continued on the street in late noon deals, as traders took encouragement with credit rating agency, Care Ratings' latest report stating that the investment climate in India has improved amid factors like improved gross fixed capital formation and higher government expenditure. It also highlighted rising government's spending in the sectors like infrastructure, housing and defence. Domestic sentiments also got boost, with the Electronics and IT Minister Ravi Shankar Prasad's statement that the Indian government will focus on manufacturing of medical electronics, defence electronics and scaling up the manufacturing capacity of automobile electronics, as part of its plan to grow Indian digital economy to $1trillion. Traders paid no heed towards a report showing that as many as 369 infrastructure projects, each worth Rs 150 crore or above, have shown cost overruns to the tune of over Rs 3.58 lakh crore owing to delays and other reasons. Finally, the BSE Sensex surged 307.14 points or 0.85% to 36,270.07, while the CNX Nifty was up by 82.90 points or 0.77% to 10,888.35.

 

The US markets ended deeply lower with cut of over two percent on Monday, with the S&P 500 and Nasdaq posting fresh year-to-date closing lows, extending the worst start to a December since 1980, amid lingering concerns about global economic growth as well as continued uncertainty about trade between the US and China. Negative sentiment was also generated by some disappointing US economic data, including a report from the National Association of Home Builders unexpectedly showing a continued deterioration in confidence in the month of December. The report said the NAHB/Wells Fargo Housing Market Index dropped to 56 in December after tumbling to 60 in November. Street had expected the index to inch up to 61. With the unexpected monthly decrease, the housing market index tumbled to its lowest level since hitting 54 in May of 2015. Further, a separate report from the New York Federal Reserve showed a much bigger than expected slowdown in the pace of growth in regional manufacturing activity in December. The New York Fed said its general business conditions index plunged to 10.9 in December after rising to 23.3 in November. Besides, traders were also on edge ahead of the Federal Reserve's highly anticipated monetary policy announcement scheduled for Wednesday. The Fed is widely expected to raise interest rates by another quarter point, although traders are likely to closely scrutinize the central bank's accompanying statement and forecasts for clues about future rate hikes. Dow Jones Industrial Average dropped 507.53 points or 2.11 percent to 23592.98, Nasdaq slipped 156.93 points or 2.27 percent to 6753.73 and S&P 500 was down by 54.01 points or 2.08 percent to 2545.94.

 

Crude oil futures ended lower on Monday, with US oil prices settling below $50 a barrel level and marking its lowest settlement in more than a year. The market failed to stabilize after a weekly loss, with prices suffering additional pressure from data that reportedly revealed a jump in crude stocks at the US trading hub. The Energy Information Administration (EIA) released its monthly Drilling Productivity report, forecasting a rise of 134,000 barrels a day in US shale oil production for January to 8.166 million barrels a day. Benchmark crude oil futures for January dropped $1.32 or 2.6 percent to settle $49.88 a barrel on the New York Mercantile Exchange. February Brent crude declined 67 cents or 1.1 percent to settle at $ 59.61 a barrel on London's Intercontinental Exchange.

 

In line with equity market, Indian rupee ended significantly higher against dollar on Monday, on persistent selling of the American currency by exporters. Traders took comfort with commerce ministry's latest data which showed that India's exports grew by a meager 0.80% to $26.5 billion in November, even as the trade deficit widened to $16.67 billion. Exporters attributed the marginal export growth in November to high base effect, as the foreign shipments in the comparable month of the previous fiscal were quite high at $26.29 billion. Besides, imports rose by 4.31% to $43.17 billion during the month. Some optimism also spread among the investors with Care Ratings in its latest report stating that the investment climate in India has improved amid factors like improved gross fixed capital formation and higher government expenditure. On the global front, euro clawed itself off recent lows on Monday as the dollar paused near 18-month highs and traders waited to see whether the U.S. Federal Reserve's policy meeting this week would calm nerves about slowing global economic growth. Finally, the rupee ended at 71.56, 34 paise stronger from its previous close of 71.90 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 3854.44 crore against gross selling of Rs 3092.13 crore, while in the debt segment, the gross purchase was of Rs 1021.52 crore with gross sales of Rs 934.81 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.35 crore against gross selling of Rs 0.62 crore.

 

The US markets ended sharply lower on Monday as investors worried about the health of the global economy ahead of the final policy meeting of the Federal Reserve this year. Asian markets were trading in red on Tuesday following sell-off on Wall Street. Besides, investors are keeping a close watch on a major speech by Chinese President Xi Jinping. Indian benchmark indices extended their winning streak for fifth straight session and ended higher on Monday with falling oil prices, a strengthening rupee, and reports of improving investment climate in the country also boosted investor sentiment. Today, the markets are likely to make pessimistic start on weak global cues amid lingering concerns about global economic growth. Traders will be concerned about S&P Global Ratings' statement the increasing involvement of the government in the affairs of the Reserve Bank of India (RBI) could undermine the hard-fought improvements in the banking system over the past few years. It termed the exit of Urjit Patel as credit negative. There will be some cautiousness as Former RBI Governor Raghuram Rajan cautioned that transfer of excess reserve to the government may bring down rating of the central bank. Rating downgrade of the RBI from ‘AAA' would make borrowing costlier for the central bank and will have implication for the entire economy. Also, there will be negative reaction as engineering exporters' body EEPC India said exporters are facing the threat of losing refunds and a possible action by the Enforcement Directorate as banks are not issuing remittance receipts despite submission of required documents. However, traders may take some support later in the day with the Export Import Bank of India's (Exim Bank) statement that the country's export growth will surge to 7% for the October-December quarter. The Exim Bank estimate said merchandise exports will go up to $82.39 billion for the third quarter of the fiscal year, as against $77 billion. Some encouragement may also come with the Ministry of Commerce's data showing that Foreign Direct Investment (FDI) has increased constantly from $45.15 billion in 2014-15 to $60.97 billion in 2017-18. Meanwhile, the Corporate Affairs Ministry plans to amend the rules for incorporation of companies as part of efforts to provide more clarity on norms related to availability of names. Moreover, regulator SEBI put in place a more robust risk management framework with regard to margin system for the equity derivatives segment. There will be some buzz in the e-commerce sector related stocks with report that the National Association of Software and Services Companies (NASSCOM) Strategic Review 2018, in the Information Technology and Business Process Management (IT-BPM) sector in India, said that the Indian e-commerce market grew 17% to $38.5 billion in the financial year 2018-19.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,888.35

10,855.35

10,910.85

BSE Sensex

36,270.07

36,158.36

36,347.05

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

352.70

181.00

178.82

183.82

Tata Motors

285.26

173.95

168.82

177.52

Vedanta

276.14

205.50

202.30

211.00

IOC

184.81

142.90

141.77

143.57

ICICI Bank

183.78

358.45

353.67

361.87

 

  • NTPC has acquired Barauni Thermal Power Station in District Begusarai in the state of Bihar from Bihar State Power Generation Company effective on December 15, 2018. 
  • Infosys has signed an agreement to divest its shares in CloudEndure on December 14, 2018, for a total consideration of approximately $15.3 million. 
  • IOC has entered into a MoU with the Savera Group, with an aim to open food stores in the company's highway retail outlets across the country. 
  • JSW Steel has restarted production at 2 million tonne per annum pellet plant at Monnet Ispat and Energy and ramped up the DRI production to its optimal capacity to bring down the cost.
News Analysis