NSE Intra-day chart (20 June 2017)
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Market Commentary 21 June 2017
Markets to make a soft start tailing weak global cues


It turned out to be a vulnerable performance from Indian benchmark indices on Tuesday, as they failed to snap the session in the green territory and settled marginally below the neutral lines. Sentiments remained subdued after finance minister Arun Jaitley said that the economy will have to face short-term challenges in implementing the biggest tax reforms since Independence. He further added that the official launch of the GST will take place on the midnight of June 30 at a function, which will be organised in Central Hall of Parliament. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory despite getting off to a gap-up opening. Shares of IT companies rose following overnight rebound in US technology stocks, while banking stocks declined after Punjab joined Maharashtra and Uttar Pradesh in announcing sops for farmers. Punjab Chief Minister Amarinder Singh on Monday announced a total waiver of entire crop loans of 8.75 lakh small and marginal farmers. Some concerns also came with report that foreign portfolio investors (FPIs) sold shares worth a net Rs 250 crore on June 19, 2017. However, the downside risks for the frontline indices was limited by Fitch Ratings' latest report indicating that India's economic growth is expected to rise by 7.4% and 7.6% in the next two fiscal years. The rating agency added that the investment in India is also expected to witness gradual rise owing to transmission of supportive monetary policy along with the government's various structural reforms. Some support also came with India, pitching for a greater engagement with BRICS (Brazil, Russia, India, China and South Africa) nations on issues the international community addressed during BRICS Foreign Ministers meeting in Beijing. Meanwhile, Airline stocks such as SpiceJet, IndiGo and Jet Airways gained traction after passengers carried by domestic airlines grew by close 18% to 465.87 lakhs during January-May 2017 as against 396.04 lakhs in the corresponding period of previous year.  Finally, the BSE Sensex declined 14.04 points or 0.04% to 31297.53, while the CNX Nifty was down by 4.05 points or 0.04% to 9,653.50. 

 

The US markets closed lower on Tuesday, as investors dumped energy shares after crude-oil prices slipped into bear-market. Crude oil prices sank to a 10-month low on ongoing worries about a supply glut pressured prices. Investors are keeping an eye on the parade of Federal Reserve speakers to get a handle on the central bank's stance on future rate increases as well as politics.  On the economy front, the US current-account deficit, a measures of the nation's debt to other countries, rose 2.5% to $116.8 billion in the first quarter. The increase in the current-account deficit in the fourth quarter was tied to a higher trade deficit in goods such as foreign autos or cellphones and a smaller surplus in primary income - returns on American-owned assets held abroad. The fourth-quarter gap in the current account was raised to $114 billion from an original reading of $112.4 billion. The current account reveals if a country is a net lender or debtor. The current-account deficit was 2.5% of GDP in the first quarter, up slightly from 2.4% at the end of 2016. The Dow Jones Industrial Average lost 61.85 points or 0.29 percent to 21,467.14, Nasdaq dropped 50.98 points or 0.82 percent to 6,188.03, while S&P 500 edged lower by 16.43 points or 0.67 percent to 2,437.03.

 

Crude oil futures slumped to a seven-month low on Tuesday ahead of inventory data, and amid reports that Nigeria and Libya are ramping up production. The two most vulnerable OPEC nations are exempt from the cartel's supply quota deal with Russia. Sentiment on oil remained negative for the second-consecutive session, as investors continued to doubt Opec and its allies' efforts to rebalance supply and demand in the market in the wake of rising global output. Benchmark crude oil futures for July delivery ended lower by $0.92 or 2.1 percent to $43.23 on the New York Mercantile Exchange. In London, Brent crude for July delivery ended down by 1.90 percent to $46.01 on the ICE.

 

Indian rupee depreciated against the US dollar on Tuesday, due to fresh demand for the American currency from banks and importers. Sentiments remained subdued with Fitch Rating's latest report that demonetisation of old Rs 500 and 1,000 notes had a material impact on spending as reflected in significant slowing of GDP growth in January-March and warned that the ongoing steep decline in investment could spell risks to growth potential. Besides, dollar's strength against some currencies overseas also pushed down the rupee. On the global front, dollar hit a three-week high against a basket of currencies on Tuesday, after an influential Federal Reserve official said U.S. inflation would pick up as wages improved, bolstering bets on the Fed continuing to raise interest rates. Finally, the rupee ended at 64.50, 8 paise weaker from its previous close of 64.42 on Monday.

 

The FIIs as per Tuesday'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 3886.89 crore against gross selling of Rs 4058.44 crore, while in the debt segment, the gross purchase was of Rs 1745.12 crore with gross sales of Rs 671.00 crore.

 

The US markets ended mostly in red and the Dow and the S&P 500 pulled back off yesterday's record closing highs, amid a sharp drop by the price of crude oil and lacking any major US economic data in last session. The Asian markets have made a soft start and some of the indices led by the Japanese market are down by about a quarter percent. Chinese market too was mildly in red despite the MSCI Inc. adding the nation's domestic stocks to its emerging-markets index. The Indian markets after a lackluster trade ended mildly in red in the last session. Today, the start is likely to remain somber and the markets will follow the global trend. Traders will be concerned with the inclusion of Chinese mainland stocks to the MSCI index, which could lead to hundreds of billions of dollars worth of share purchases, shrinking shares of other emerging markets, including India. Traders may however get some support with finance minister Arun Jaitley's statement that the Centre will stick to its fiscal deficit target of 3.2% of gross domestic product (GDP) for 2017-18. Jaitley also made it clear that the Centre has no plans to announce any farm loan waiver. There will be some action in the textile stocks, as the rating agency ICRA in its latest report has said that the impact of the Goods and Services Tax (GST) is likely to be neutral to positive across segments in the textile industry compared to the current tax regime. There will be buzz in the oil stocks too, as the international crude oil prices slumped by around 2 percent overnight. The housing finance companies may come under pressure on a ICRA report that housing credit growth moderated to 16 per cent in 2016-17 from 19 per cent in 2015-16.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

9653.50

9639.33

9672.08

BSE Sensex

31297.53

31241.84

31372.88

 

Nifty Top volumes

 

Stock

Volume

(in Lacs)

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

ICICI Bank

168.49

292.45

288.50

295.90

SBI

149.28

290.10

286.80

292.20

Tata Motors

120.15

467.40

458.68

473.43

Tata Power

109.63

82.10

79.05

83.80

ITC

82.61

308.70

307.13

311.23

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  • Maruti Suzuki India's Alto retained the top position in May as the best selling model with 23,618 units sold, as against 19,874 units in May last year.
  • HDFC will issue secured redeemable non-convertible debentures worth Rs 775 crore on a private placement basis.
  • Yes Bank has partnered with Hike to power Unified Payments Interface based payment solutions. 
News Analysis