NSE Intra-day chart (19 December 2018)
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Market Commentary 20 December 2018
Markets to make gap-down opening amid global sell-off

 

Jubilation continued for the seventh straight session on Wednesday, with both the larger peers, Sensex and Nifty, ending with notable gains. The markets made a positive start of the day, as traders took engorgement with Union Minister of Commerce and Industry Suresh Prabhu's statement that India will be 5 trillion dollar economy in coming 7-8 years and already have complete road-map for it. Domestic sentiments also remained optimistic with chairman designate of Central Board of Indirect Taxes and Customs P K Das' statement that the next three months would see the Centre put in place changes in policy and procedures to ensure India further improves its position in the Ease of Doing Business Report-2019. Adding more enthusiasm, Finance Minister Arun Jaitley released the NITI Aayog's strategy for New India, a paper envisaging goals for the country in the 75th year of its Independence in 2022. According to the NITI Aayog strategy paper, the government aims to increase India's tax-to-GDP ratio to 22 per cent and accelerate economic growth rate to 8 per cent. Besides, investors took note of Niti Aayog CEO Amitabh Kant's statement that achieving double digit growth in the manufacturing sector on sustainable basis is a ‘doable challenge' but for that the country needs to integrate with global markets. The trade remained positive during the whole day, tracking firm global cues. Traders were seemed taking encouragement with Union Minister Giriraj Singh's statement that the government will set up 20 additional technology centres to help micro, small and medium enterprises (MSMEs). These centres support MSMEs by giving them access to advanced manufacturing technologies, skilling manpower and providing technical and business advisory support. Investors paid no heed towards a private report stating that the overall consumer confidence has slipped in the month of December, with liquidity crunch, high inflation and rising interest rates leading to pessimism. The India Primary Consumer Sentiment Index (Consumer Confidence) has dropped by 0.6% over the previous month of November, signalling growing pessimism about the future prospects of the economy. The market participants even overlooked another private report that the government's note ban decision shaved off economic growth by at least 2 percentage points for the October-December quarter of 2016 in which the demonetisation move was effected. Finally, the BSE Sensex surged 137.25 points or 0.38% to 36,484.33, while the CNX Nifty was up by 58.60 points or 0.54% to 10,967.30.

 

The US markets ended lower on Wednesday after the Fed announced its fourth interest-rate increase of the year, hiking the federal funds rate by 25 basis points to a range of 2.25% to 2.5%. While the Fed also forecast fewer than previously estimated rate hikes next year, the central bank's tone was not as dovish as some traders had hoped. The central bank said its Federal Open Market Committee decided to raise the target range for the federal funds rate by 25 basis points from 2.25 percent to 2.50 percent. Besides, cautiousness also prevailed in the markets as the central bank lowered its forecasts for real GDP growth in 2018 and 2019 to 3.0 percent and 2.3 percent, respectively. The Fed previously projected 3.1 percent growth in 2018 and 2.5 percent growth in 2019. On the economic front, existing home sales in the US unexpectedly showed a significant increase in the month of November, according to a report released by the National Association of Realtors. NAR said existing home sales surged up by 1.9 percent to an annual rate of 5.32 million in November after jumping by 1.4 percent to a rate of 5.22 million in October. Street had expected existing home sales to drop by 0.6 percent. Despite the second consecutive monthly increase, existing home sales in November were down by 7.0 percent compared to the same month a year ago. The report said the median existing home price for all housing types in November was $257,700, up 1.0 percent from $255,100 in October and up 4.2 percent from $247,200 in November of 2017. Dow Jones Industrial Average plunged 351.98 points or 1.49 percent to 23323.66, Nasdaq declined 147.08 points or 2.17 percent to 6636.83 and S&P 500 was down by 39.20 points or 1.54 percent to 2506.96.

 

After a price decline a day earlier pushed the US benchmark down to its lowest finish in nearly 16 months, Crude oil futures ended Higher on Wednesday, buoyed by a third straight weekly decline in US crude supplies and a drop in distillate stocks. The Energy Information Administration (EIA) reported that domestic crude supplies fell by 500,000 barrels for the week ended December 14. Benchmark crude oil futures for January surged 96 cents or 2.1 percent to settle $47.20 a barrel on the New York Mercantile Exchange. February Brent crude gained 98 cents or 1.7 percent to settle at $57.42 a barrel on London's Intercontinental Exchange.

 

Indian rupee trimmed most of its early gains but managed to end higher against the American currency on Wednesday, on persistent drop in crude prices amid sustained selling of the American currency by exporters and banks. Sentiments remained positive with chairman designate of Central Board of Indirect Taxes and Customs P K Das saying that the next three months would see the Centre put in place changes in policy and procedures to ensure India further improves its position in the Ease of Doing Business Report-2019. However, gains were capped as anxiety spread among the traders with a private report stating that the overall consumer confidence has slipped in the month of December, with liquidity crunch, high inflation and rising interest rates leading to pessimism. On the global front, dollar fell on Wednesday as investors bet that the Federal Reserve would signal plans to slow its pace of interest rate raises at a keenly-watched meeting later in the day. Finally, the rupee ended at 70.39, 5 paise stronger from its previous close of 70.44 on Tuesday.

 

The FIIs as per Wednesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 4369.28 crore against gross selling of Rs 4709.93 crore, while in the debt segment, the gross purchase was of Rs 1194.07 crore with gross sales of Rs 810.68 crore. Besides, in the hybrid segment, the gross selling was of Rs 0.13 crore against no buying.

 

The US markets ended lower on Wednesday after the Federal Reserve raised interest rates for the fourth time in 2018 and signaled a milder path of increases over the next year. Asian markets were trading in red on Thursday following the overnight sell-off on Wall Street. Investors are also cautious ahead to the Bank of Japan's monetary policy decision due later in the day. Extending gains for seventh straight session, Indian markets ended higher on Wednesday after oil prices plunged and the Reserve Bank of India (RBI) decided to inject more liquidity into the system, helping spur optimism about India's growth story. Today, the markets are likely to make gap-down opening tacking sell-off in the global markets. There will be some cautiousness with the US think-tank National Bureau of Economic Research's (NBER) report that the November 2016 demonetisation impacted economic activity in the country in the immediate aftermath, affecting the Gross Domestic Product (GDP) numbers for that fiscal, while the measure's impact had dissipated by the summer of the following year. Traders will also be concerned about the World Bank's latest report stating that India lost a staggering $86.1 billion, equivalent to over 4% of its GDP, owing to distortions in the power sector in 2016. It added that although India has achieved 100 per cent village electrification earlier this year, 178 million Indians still remain unconnected to the grid as per figures for 2017. Traders may react to the government think-tank Niti Aayog's statement that farm loan waiver a move helps only a fraction of farmers and is no solution to mitigate agrarian distress. However, some support may come later in the day with the NITI Aayog unveiling a strategy document with an aim to accelerate economic growth to 8% and catapult the country to a $5-trillion economy by 2030. Laying down a multi-pronged strategy to promote the country's overall development, the document said the annual growth rate of 9 per cent by 2022-23 would be essential for generating sufficient growth and achieving prosperity for all. There will be some buzz in public sector banks (PSBs) stocks with Economic Affairs Secretary Subhash Chandra Garg's statement that the government is likely to make additional capital infusion in the PSBs. This will be over and above Rs 1.35 lakh crore capital infusion announced by the government for the PSBs in October last year to meet global capital risk norms called Basel III. There will be some reaction in agriculture related stocks with Crisil expressing concerns on an over 5% dip in sowing for winter crops, which account for the bulk 40% of the nation's annual agricultural output, amid reports of rising rural distress. There will be some buzz in the insurance sector stocks with Moody's Investors Service's statement that the new regulations for re-insurance in India are credit-positive. It said they will improve Indian insurers' access to a broader reinsurance base, which will support their management of underwriting risk and performance.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,967.30

10,935.15

10,992.30

BSE Sensex

36,484.33

36,392.47

36,565.59

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

402.48

179.55

177.72

182.27

SBI

261.24

300.70

296.27

303.57

ICICI Bank

194.42

366.50

361.92

370.17

IOC

181.33

145.95

145.08

147.28

Axis Bank

167.59

641.65

623.32

655.82

 

  • NTPC's Feroze Gandhi Unchahar Thermal Power Station of Unit number 6 of 500 MW capacity has been synchronized with grid after boiler restoration. 
  • Yes Bank has sold 1,23,37,323 equity shares having nominal value of Rs 10 each, constituting 2.13% of the paid-up share capital of Fortis Healthcare in tranches. 
  • TCS has launched a next-generation, private cloud in Canada to help forward-thinking enterprises move rapidly along the digital maturity curve. 
  • Vedanta is looking to contain its alumina imports to 500,000 tonnes a year by the financial year 2021.
News Analysis