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Market Commentary 04 September 2017
Markets to make a soft start on tepid regional cues


Extending their northward journey for third straight day, Indian equity benchmarks ended the new F&O series on optimistic note. Soon after a cautious start, markets gained traction and showed ample of strength in early deals, as traders chose to ignore weak Gross Domestic Product (GDP) numbers which came at a dismal 5.70 percent against 7.90 percent in the same quarter last year and a 13 quarter lowest level. According to data released by the government, quarterly GVA at basic prices for Q1FY18 from manufacturing sector grew by 1.2 percent as compared to the growth of 10.7 percent in Q1FY17. Traders focused on Finance Minster Arun Jaitley's statement the lower GDP numbers to pre-GST destocking of goods and expressed hope that the economy will grow at 7 percent, saying manufacturing has bottomed out. Also, Chief Statistician of India T C A Anant said that the slowdown in GDP growth for the first quarter of 2017-18 to 5.7 percent was due to de-stocking by firms as caution ahead of the GST roll-out on July 1. Markets continued its strong run till end with Sensex ending near its crucial 31,900 mark, while Nifty ending above their crucial 9,950 mark, as traders shrugged off eight core sectors which slowed down to 2.4 percent in July. The contraction was mainly seen in output of crude oil, refinery products, fertiliser and cement. Rebound in India's manufacturing PMI in the month of August to 51.2 as compared to 47.9 in July, aided by rise in new orders and output across the country, also contributed to the up-move. Finally, the BSE Sensex surged 161.74 points or 0.51% to 31,892.23, while the CNX Nifty was up by 56.50 points or 0.57% to 9,974.40.

 

The US markets closed higher on Friday, on expectations that a weaker-than-expected rise in August nonfarm payrolls could dull the Federal Reserve's desire to further raise borrowing costs in 2017. Trading activity was light, with volume subsiding after an initial rush of data as traders prepared for the three-day Labor Day weekend. US financial markets are closed Monday. The New York Federal Reserve increased its estimate of US gross domestic product growth for the third quarter above 2 percent, based largely on surprisingly strong data on domestic manufacturing activity in August. The regional central bank's ‘Nowcast' model calculated the economy was expanding at an annualized pace of 2.17 percent in the third quarter. On the economy front, the US created 156,000 new jobs in August, below forecasts but still enough to keep a growing economy on an even keel. Meanwhile, manufacturing activity was the strongest in six years in August. The Institute for Supply Management said its manufacturing index in August climbed to 58.8% from 56.3% in July. That is the highest reading since April 2011. The Dow Jones Industrial Average added 39.46 points or 0.18 percent to 21,987.56, the Nasdaq gained 6.67 points or 0.10 percent to 6,435.33, and the S&P 500 edged higher by 4.9 points or 0.20 percent to 2,476.55.

 

Crude oil futures extended gains on Friday but posted fifth weekly loss, as the shutdown of several refineries in the wake of tropical storm Harvey weighed on refinery activity reducing demand for oil. A week after Tropical Storm Harvey crossed the Gulf of Mexico off Port O'Connor, Texas, nearly a quarter of U.S. refining capacity has been taken offline, representing roughly 4.4 million barrels per day. Also, the crude prices gains were capped with the US rig count remaining unchanged in the week. Oilfield services firm Baker Hughes said its weekly count of oil rigs operating in the United States remained steady at 759, unchanged from a week ago. Benchmark crude oil futures for October delivery ended up by 0.06 percent to $47.29 on the New York Mercantile Exchange. In London, Brent crude for October delivery ended down by 0.27 cent at $52.29 a barrel on the ICE.


Indian rupee depreciated against the US dollar on Friday, due to fresh demand for the American currency from banks and importers. Sentiments remained dampened after data showing India's Gross Domestic Product (GDP) growth slowed down to a three-year low of 5.7% during the first quarter (April-June) of the fiscal year 2017-18, as against 7.9% in the corresponding period a year ago and 6.1% in the preceding quarter. Moreover, the greenback rose against other currencies overseas on better-than-expected US growth data, too kept pressure on the local currency. However, a firm domestic equity market limited further depreciation of Indian currency. On the global front, dollar edged higher against yen on Friday, as investors remained cautious ahead of the key monthly US employment data. Finally, the rupee ended at 64.03, 12 paise weaker from its previous close of 63.91 on Thursday.

 

The FIIs as per Friday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 8453.97 crore against gross selling of Rs 8010.06 crore, while in the debt segment, the gross purchase was of Rs 444.21 crore with gross sales of Rs 221.02 crore.

 

The US markets made a modestly higher closing in the last session despite disappointing monthly jobs data. The Labor Department said non-farm payroll employment climbed by 156,000 jobs in August compared to expectations for an increase of about 180,000 jobs. The Asian markets have made mostly a soft start and some indices are down by over half a percent as the geopolitical worries flared up, after North Korea tested a nuclear bomb on Sunday and US President Trump threatened to increase economic sanctions and halt trade with any nation doing business with Kim Jong Un's regime. The Indian markets closed decently higher in the last session and the major benchmarks reached very close to the crucial levels. Today, the start of the new week is likely to be a bit soft-to-cautious tailing the tepidness in the regional markets on increased geo-political worries. However, trade may stabilize going forward and some sector specific movement can be seen with the change of ministerial heads in the latest Cabinet reshuffle, Nirmala Sitharaman former minister of state for Commerce has been given defence portfolio, while Piyush Goyal replaced Suresh Prabhu in Railway Ministry, the cabinet also saw the induction of nine new faces. Traders will also be getting some support with chairman of the New Development Bank of BRICS, K.V. Kamath's statement that demonetisation has proved to be good exercise for India, as it has achieved the goals of eliminating illicit and counterfeit cash from the economy. Meanwhile, the government, on the recommendations of the Goods and Services Tax Council, has waived the penalty of Rs 200 per day for taxpayers who failed to file the first GST returns within the deadline. There will be some buzz in steel sector stocks, as Steel Minister Chaudhary Birender Singh has said to produce more special steel to cut imports. He said that PSUs should develop appetite for special steel as value addition remains the mantra for success. There will be some buzz from the primary markets too, as the Apex Frozen Foods, a, is scheduled to mark its debut on the bourses today. The issue which came in price band of Rs 171–175 per share was subscribed 6.10 times. The issue price is fixed at Rs 175 per share.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

9974.40

9928.35

10001.95

BSE Sensex

31892.23

31751.63

31988.46

 

Nifty Top volumes

 

Stock

Volume

(in Lacs)

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

Bank of Baroda

123.76

138.25

136.98

140.18

Vedanta

100.94

314.95

310.28

317.68

Hindalco

98.52

243.75

239.53

246.48

SBI

82.55

277.85

276.17

279.97

ICICI Bank

74.73

298.30

297.07

299.62

 
  • Tata Motors has reported 14% rise in total sales of passenger and commercial vehicle in August 2017 at 48,988 vehicles as compared to 43,105 vehicles sold in August 2016.
  • Reliance Industries has issued and allotted on private placement basis the second tranche of unsecured non-convertible redeemable debentures aggregating to Rs 2,500 crore.
  • Dr. Reddy's Laboratories and Nasdaq-listed Vivus Inc. have entered into settlement agreement to resolve a long-pending patent litigation related to weight management capsule Qsymia.
  • M&M has reported its auto sales performance for August 2017 which stood at 42,116 vehicles, compared to 40,591 vehicles during August 2016, representing a growth of 4%.
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