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Market Commentary 01 March 2017
Markets to get marginally positive start

Indian benchmark indices once again settled in the red zone on the last trading day of the month as investors stayed cautious ahead of GDP data scheduled to be released later in the day. According to private report, the second official estimate of GDP growth is likely to show the economy expanded below 7% in FY17, tripped by the November 8 demonetisation that dented the consumption demand. Sentiments weakened further with India Ratings and Research's (Ind-Ra's) estimates that aggregate fiscal deficit of Indian states will increase marginally to 3.3% of gross domestic product (GDP) in FY18 from its forecast of 3.2% for FY17. It expects states' debt/GDP ratio may increase marginally to 24.3% in FY'18 from 24% forecasted for FY'17. However, the downside remained capped with Finance Minister Arun Jaitley's statement that India has potential to grow faster and plans are underway to reduce poverty and create jobs in rural areas. Adding optimism among inventors, Economic Affairs Secretary Shaktikanta Das said Goods and Services Tax (GST) will be implemented from July 1, as all states have agreed on the implementation date. The government plans to get the GST Council's approval on integrated GST (iGST), central GST (cGST) and state GST (sGST) drafts at its March 4-5 meeting before the second half of the budget session of Parliament begins on March 9. Das also said that the positive effects of demonetisation will be visible from April and the completion of remonetisation process will drive consumption going forward. Meanwhile, shares of smallcap companies were in focus with the BSE Smallcap index touched a fresh nine-year high on the BSE in intra-day trade after a sharp rally in select Tata Group companies, logistics, auto ancillary, steel and banking stocks. Tata Teleservices (Maharashtra), TRF, Tata Metaliks and Tata Sponge Iron from Tata Group have surged between 5% and 20% on the BSE. Finally, the BSE Sensex declined 69.56 points or 0.24% to 28743.32, while the CNX Nifty was down by 17.10 points or 0.19% to 8,879.60.    

 

The US markets closed lower on Tuesday, while the S&P 500 managed to book its best monthly gain in a year. A handful of Federal Reserve policymakers jolted markets into higher expectations for a March US interest rate increase, with comments that suggested rate-setters are worried about waiting too long in the face of pending economic stimulus from Washington. On the economy front, US consumers are the most confident in the US economy in 15 years, buoyed by the strongest job market since before the Great Recession. The survey of consumer confidence rose to 114.8 in February from 111.6 in January. That's the highest level since July 2001. A much healthier labor market has lifted the spirits of consumers. The share of those living in the US who said jobs are hard to get, for example, fell to an eight-year low of 20.3% in February. Millions of Americans have found new jobs since 2010, tugging the unemployment rate below 5% and forcing companies to increase pay somewhat faster after years of sluggish wage growth. A gauge of Chicago-area manufacturing shot higher in February. MNI Indicators said the Chicago PMI rose by 7.1 points to 57.4 in February, marking the highest reading in more than two years. The Dow Jones Industrial Average lost 25.20 points or 0.12 percent to 20,812.24, Nasdaq was down 36.46 points or 0.62 percent to 5,825.44, while S&P 500 dropped 6.11 points or 0.26 percent to 2,363.64. 

 

Crude oil futures remained in consolidation mood on Tuesday and ended almost flat with a negative bias on rising US oil output, although OPEC production cuts continued to offer support. There were reports that Saudi Arabia is pumping oil at pace that will preserve the global supply glut that has kept oil below $55 a barrel, while at the same time, US producers are also ramping up, with domestic inventories at a record high for this time of year. Benchmark crude oil futures for April delivery gained $0.04 to $54.01 on the New York Mercantile Exchange. In London, Brent crude for April delivery ended lower by $0.37 at $55.56 on the ICE.

 

Indian rupee ended marginally stronger against the US dollar on Tuesday on fresh selling of American currency by banks and exporters. Investors remained cautious ahead of GDP data scheduled to be released later in the day. According to private report, the second official estimate of GDP growth is likely to show the economy expanded below 7% in FY17, tripped by the November 8 demonetisation that dented the consumption demand. However, local currency got some support with Finance Minister Arun Jaitley's statement that India has potential to grow faster and plans are underway to reduce poverty and create jobs in rural areas. On the global front, Sterling traded close to a two-week low against dollar on Tuesday, as investors awaited a speech by U.S. President Donald Trump, with the pound under pressure by worries about the future of Britain as it leaves the European Union (EU). Finally, the rupee ended at 66.69, 1 paise stronger from its previous close of 66.70 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 5185.67 crore against gross selling of Rs 5331.00 crore, while in the debt segment, the gross purchase was of Rs 1014.89 crore with gross sales of Rs 355.89 crore.

 

The US markets closed lower in last session reflecting trepidation ahead of President Donald Trump's highly anticipated speech to a joint session of Congress. With the drop on the day, the Dow and the S&P 500 pulled back off yesterday's record closing highs. The Asian markets have made mostly a positive start, as investors searched for new details of Donald Trump's economic strategy during his speech to Congress. Chinese market was up after official factory gauge firmed in February as producer prices rebounded. The Indian markets extended their weakness in last session and ended with another quarter percent of loss, with sentiments turning cautious ahead of the Q3 and updated full year GDP numbers. Today, the start is likely to be in green and the traders will be reacting positively to the unexpectedly better GDP growth for the third quarter. As per the Central Statistical Office (CSO), Q3 GDP growth is pegged at 7 percent, marginally lower than the Q1 growth of 7.2 percent and Q2 growth of 7.4 percent. It's now forecast to achieve 7.1 per cent growth in the year to March. However, there will be some cautiousness too with India's fiscal deficit touching Rs 5.64 lakh crore at the end of January, 105.7 percent of the full-year target, mainly due to lower realisation of non-tax revenue. In the Budget presented on February 1, the government had retained the fiscal deficit target at 3.5 per cent of GDP. In another negative development, growth in the core sector industries slipped to a five-month low in January to 3.4% compared with 5.7% in the year-ago period. The slower core sector is likely to dent industrial growth further. The telecom stocks will keep buzzing with report that the government is looking at a fresh round of spectrum auction between July and December and will send a recommendation to the telecom regulator soon.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

8879.60

8859.88

8907.03

BSE Sensex

28743.32

28684.11

28839.53

 

Nifty Top volumes

Stock

Volume

(in Lacs)

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

IDEA

548.90

115.85

110.92

118.97

Tech Mahindra

311.71

499.40

488.90

509.45

Grasim Industries

253.59

990.20

967.53

1025.73

ICICI Bank

165.22

276.35

274.67

279.07

NTPC

140.39

162.95

161.42

165.32

 

  • Tata Motors has entered into partnership with Tata CLiQ, to offer test drive booking for the newly launched SUV Hexa.
  • Tata Power has increased its generation capacity by more than 8% in Q3 FY17 as compared to Q3 FY16.
  • Tata Steel's Rs 542-crore ferro-chrome plant in Odisha has started production.
  • HDFC Bank has launched its secure banking programme at Jalandhar in Punjab.
News Analysis