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Market Commentary 01 February 2020
Benchmarks to open in red ahead of the Union Budget 2020

 

The Economic Survey failed to cheer Indian equity markets on Friday, as Sensex and Nifty ended lower. The start of the day was firm, aided with a report that the government is aiming at $80 billion of jewellery exports in the next five years from the present level of $40 billion. The Centre also expects the jewellery industry to generate additional employment of 2 million. But, in the late morning deals, volatility hit over the markets, as another report stated that the government's efforts to drive Make in India to success have not yet reflected in the country's industrial output growth. India's Index of Industrial Production (IIP) growth is expected to fall to 2 per cent in the current financial year 2019-20. Indices staged recovery in late noon deals but failed to hold & settled in red, amid a private report that optimism level of mid-market Indian business leaders have seen a dip of 10 percentage points in the second half of 2019 as compared to the first half but have displayed cautious optimism while entering 2020. Sentiments remained cautious, even after the Economic Survey projected a GDP growth rate of 6-6.5 percent for the next fiscal. The survey also noted that the government is committed to supporting the micro, small and medium enterprises (MSME) sector, terming it an important segment of the economy that fosters entrepreneurship and generates employment opportunities at lower capital cost. Finally, the BSE Sensex slipped 190.33 points or 0.47% to 40,723.49, while the CNX Nifty was down by 73.70 points or 0.61% to 11,962.10.

 

The US markets ended deeply in red on Friday amid lingering concerns about the coronavirus outbreak, as the death toll from the disease continues to rise. The latest figures from China's National Health Commission say that at least 213 people have died and about 9,700 have been sickened. The number of people sickened by the new coronavirus in China now exceeds the global total infected with severe acute respiratory syndrome, or SARS, which killed nearly 800 people after emerging from southern China in late 2002 and spreading into 2003, but so far the death toll from the current epidemic is lower. The UK and Russia have also confirmed their first cases of coronavirus infection, raising concerns about the rapid spread of the disease and the impact on the global economy. Besides, adding to the worries, Delta and American Airlines recently announced plans to suspend all flights to China as a result of the outbreak. On the economic data front, personal income in the US increased by slightly more than anticipated in the month of December, according to a report released by the Commerce Department. The report said personal income rose by 0.2 percent in December after climbing by a downwardly revised 0.4 percent in November. Street had expected income to inch up by 0.1 percent compared to the 0.5 percent increase originally reported for the previous month. Disposable personal income, or personal income less personal current taxes, also crept up by 0.2 percent in December after rising by 0.4 percent in November. Meanwhile, revised data released by the University of Michigan showed US consumer sentiment unexpectedly improved in the month of January compared to the previously reported deterioration. The consumer sentiment index for January was upwardly revised to 99.8 from the preliminary reading of 99.1. The index is now up from the final December reading of 99.3.

 

Crude oil futures ended lower on Friday, weighed down by growing concerns about outlook for energy demand due to the rapidly spreading coronavirus' potential impact on the global economy. China's National Health Commission in its latest data said that at least 213 people have died and about 9,700 have been sickened by the coronavirus. Meanwhile, the US State Department urged Americans not to travel to China. West Texas Intermediate (WTI), the US benchmark, logged a 4.9% weekly fall, which led to a 15.6% January decline. That was the largest monthly loss since a 16.3% May decline for the front-month contract. The March contract for Brent, the global benchmark, lost 4.2% for the week, for a nearly 12% January fall. Crude oil futures for March declined 58 cents or 1.1 percent to settle at $51.56 a barrel on the New York Mercantile Exchange. March Brent lost 13 cents or 0.2 percent to settle at $58.16 a barrel on London's Intercontinental Exchange.

 

Indian rupee strengthened considerably against dollar on Friday on increased selling of the American currency by exporters and banks. Sentiments remained positive after the Economic Survey projected a GDP growth rate of 6-6.5% for the next fiscal (FY21). The survey also noted that the government is committed to supporting the micro, small and medium enterprises (MSME) sector, terming it an important segment of the economy that fosters entrepreneurship and generates employment opportunities at lower capital cost. However, strengthening of the American currency vis-a-vis other currencies overseas along with losses in the domestic equity market restricted the further up move. On the global front, British Pound has on Friday extended its gains against the world's major currencies following the Bank of England's decision to keep interest rates unchanged and is now set to be the best-performing major currency of January.  Finally, the last traded price of rupee was 71.34, 24 paise stronger from its previous close of 71.58 on Thursday.

 

The FIIs as per Friday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 6401.33 crore against gross selling of Rs 5775.41 crore, while in the debt segment, the gross purchase was of Rs 1697.99 crore with gross sales of Rs 1389.28 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.40 crore against gross selling of Rs 1.50 crore.

 

The US markets ended significantly lower on Friday amid lingering concerns about the coronavirus outbreak, as the death toll from the disease continues to rise. Asian markets settled mixed on Friday as fears over the ongoing coronavirus outbreak in China continued to weigh on investor sentiment. Indian markets ended lower on Friday, dragged by metals, IT stocks, after the economic survey predicted FY20 GDP growth at 5%, slowest since the global financial crisis of 2008-09. Today, the start of session is likely to be pessimistic amid escalating concerns in the global markets and ahead of the Union Budget 2020 that will be tabled in the Parliament later in the day. There are expectations that the government to increase state spending on infrastructure and offer some tax incentives in its Budget 2020, aiming to get growth back up from its lowest in a decade. There will be some cautiousness as the government's fiscal deficit touched 132.4% of the full-year target at December-end mainly due to slower pace of revenue collections. The Controller General of Accounts (CGA) data showed that in actual terms, the fiscal deficit or gap between expenditure and revenue was Rs 931,725 crore. The government aims to restrict the gap at 3.3% of the GDP or Rs 703,760 crore in the year ending March 2020. Traders will also be concerned with Ficci's statement that India Inc is facing huge risks from delays in necessary structural reforms in the factor markets and lack of adequate credit availability to MSMEs. Though, some encouragement may come later in the day as growth of eight core industries recovered to 1.3% in December 2019 after remaining in the negative zone in the previous four months helped by expansion in production of coal, fertiliser and refinery products. Some support may also come with report that GST collections have crossed the Rs 1 trillion mark for the third month in a row in January with improved compliance and plugging of evasion. Besides, the Reserve Bank of India (RBI) data showed that the country's foreign exchange reserves reached a life-time high of $466.693 billion after a massive $4.535 billion spike in the week to January 24. There will be some reaction in sugar stocks as according to All India Sugar Trade Association (AISTA), sugar production is estimated to fall almost 17.5 per cent from 33.2 MT last year to 27.4 MT in the ongoing season. The auto sector stocks will also be in action, reacting to their monthly sales numbers. Also, there will be lots of important earnings announcements too, to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,962.10

11,904.12

12,061.82

BSE Sensex

40,723.49

40,544.84

41,028.32

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

1,176.36

39.25

38.57

40.07

SBI

926.57

318.45

310.80

323.90

ONGC

833.60

108.95

105.13

114.38

Tata Motors

756.22

176.60

172.25

184.65

NTPC

645.18

111.50

110.25

114.00

 

  • M&M's electric vehicle arm -- Mahindra Electric has unveiled a new corporate brand identity with a new logo and tagline - Spark the New. 
  • NTPC is going to commence commercial operation of Unit-1 of 660 MW of Khargone Super Thermal Power Station (2 x 660 MW) from February 01, 2020. 
  • Tata Motors' wholly owned subsidiary -- JLR has launched a new version of Range Rover Evoque in India. 
  • IOC's board has accorded approval to the project for expansion of capacity of its Barauni Refinery in Bihar from 6.0 MMTPA to 9.0 MMTPA at an estimated cost of Rs 13,779 crore.
News Analysis