NSE Intra-day chart (20 August 2019)
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Market Commentary 21 August 2019
Markets to open marginally in red amid weak global cues


Indian equity markets faced volatility on Tuesday, with Sensex & Nifty closing below their crucial psychological levels of 37,400 & 11,050, respectively. Indices made a cautious start, as former Reserve Bank of India's Governor Raghuram Rajan called slowdown in the economy as very worrisome and said the government needs to fix the immediate problems in power and non-bank financial sectors and come out with a new set of reforms to energise private sector to invest. Sentiments also got hit, with Care Ratings' report that India's jobs scene -- with unemployment at a 45-year high -- is looking gloomy with hiring activity slowing across most sectors. In the last leg of trade, markets managed to come off their day's low points to settle with marginal losses, on the back of firm global markets. Traders took support with Finance Minister Nirmala Sitharaman's statement that corporate tax rate for companies with over Rs 400 crore turnover will be gradually cut to 25% and the government will support wealth creators. Besides, Competition Commission of India (CCI) has introduced an automatic system of approval for combinations under Green Channel, with an effort to make mergers and acquisitions (M&A) filings approval faster. This system would significantly reduce time and cost of transactions. Finally, the BSE Sensex lost 74.48 points or 0.20% to 37,328.01, while the CNX Nifty was down by 36.90 points or 0.33% to 11,017.00.


The US markets ended lower with cut of over half a percent on Tuesday as investors contended with worries about the strength of the US economy and political developments in Europe that were weighing on government bonds. Trump once again threatened to impose tariffs on European auto imports. Traders also expressed some uncertainty ahead of the release of the minutes of the Federal Reserve's late-July meeting on Wednesday. The minutes, along with Fed Chairman Jerome Powell's speech on Friday, may shed additional light on the outlook for interest rates. The Fed cut interest rates by 25 basis points last month and CME Group's FedWatch tool currently indicates a 95 percent chance of another 25 basis point rate cut in September. Powell suggested that the July rate cut should not be seen as the beginning of a lengthy cutting cycle, but President Donald Trump has been putting intense pressure on the Fed to continue cutting rates. Trump claimed that the US economy is very strong in spite of Powell's horrendous lack of vision. He said the Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. He added if that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone. Dow Jones Industrial Average dropped 173.35 points or 0.66 percent to 25962.44, Nasdaq declined 54.25 points or 0.68 percent to 7948.56 and S&P 500 was down by 23.14 points or 0.79 percent to 2900.51.


Crude oil futures end marginally higher on Tuesday ahead of US government data that is expected to reveal a weekly decline in domestic crude stockpiles, following back-to-back weekly supply increases. Slightly easing worries about US-China trade dispute, China's interest rate reforms and expectations of more stimulus from global central banks supported oil's uptick. However, worries about near term energy demand outlook limited oil's gains. Benchmark crude oil futures for September gained 13 cents or 0.2 percent to settle at $56.34 a barrel on the New York Mercantile Exchange. October Brent rose 29 cents or 0.5 percent to settle at $60.03 a barrel on London's Intercontinental Exchange.


Indian rupee ended weaken for second consecutive session on Tuesday against the US dollar, due to rising crude oil prices along with strength in the dollar overseas. Market participants remained worried with report that former Reserve Bank of India (RBI) Governor Raghuram Rajan called slowdown in the economy very worrisome and said the government needs to fix the immediate problems in power and non-bank financial sectors and come out with a new set of reforms to energise private sector to invest. Traders took note of RBI governor Shaktikanta Das' statement that the central bank is looking to formalise policies to link loan rates to an external benchmark like the repo so as to speed up transmission. On the global front, private report stateed that the euro hovered around a two-week low versus the dollar as the US currency held strong on Tuesday, boosted by slightly higher Treasury yields, while political uncertainties in Italy also kept the common currency subdued. Finally, the rupee ended at 71.71, 28 paise weaker from its previous close of 71.43 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 3217.78 crore against gross selling of Rs 3482.82 crore, while in the debt segment, the gross purchase was of Rs 3256.87 crore with gross sales of Rs 1726.85 crore. Besides, in the hybrid segment, the gross buying was of Rs 62.47 crore against gross selling of Rs 9.06 crore.


The US markets ended in red on Tuesday as investors weighed up the prospect of fiscal stimulus from some of the world's biggest economies. Asian markets are trading mixed on Wednesday as fresh worries about a global recession led investors to dump risky assets, with US President Donald Trump showing no signs of backing down in his trade war with China. Indian markets snapped three-day winning streak and ended volatile session in red territory on Tuesday, as cautious investors awaited more details on reports of a corporate tax rate cut by the government before making fresh bets. Today, the markets are likely to make slightly negative start amid lackluster cues from global markets. Investors will be looking for the release of the minutes of the Reserve Bank of India's (RBI's) Monetary Policy meeting later in the day. The central bank lowered the repo rate by 35 basis points to 5.40% during its August meeting. There will be some cautiousness with a private report that with the issue of higher tax surcharge proving to be a thorn, a lobby of FPIs has urged the government to use information on beneficiaries to identify them and spare broad-based entities. The Budget proposal to impose a higher tax surcharge - from 15% to 25% for incomes between Rs 2 crore and Rs 5 crore and from 15% to 37% for higher incomes - on non-corporate FPIs had rattled the market. However, traders may take note of report that for effective transmission of the RBI's lower policy rates, the country's largest lender SBI suggested the regulator should ask banks to link incremental bulk deposits to repo rate as it would help in reducing cost of funds without hurting small depositors and senior citizens. Meanwhile, with an aim to further safeguard investors' interests and to take defaulters to task, capital market regulator SEBI is planning to unveil a slew of reforms, including for greater checks on credit rating agencies and for rewarding informants in insider trading cases with up to Rs 1 crore reward. There will be some buzz in the banking stocks with a private report that overall loan growth for banks in the first quarter ending June dropped 1.2% quarter-on-quarter led by modest net interest income (NII) and a sharp drop in pre-provision operating profits. Insurance stocks will be in focus with the Insurance Regulatory and Development Authority of India's (Irdai) data showing that non-life insurance companies earned a premium income of Rs 14,378.45 crore in July this year, up nearly 23% from a year ago. There will be some reaction in aviation stocks as the government extended the process of temporary allocation of slots and bilateral foreign flying rights of defunct airline Jet Airways to other airlines till December.


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