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Market Commentary 16 January 2017
Markets to start the new week on a soft note

 

It turned out to be a lackadaisical performance from the Indian equity indices on Friday as they failed to snap the session in the positive territory and settled marginally below the neutral line. Marketmen looked to consolidate their position in the session after rocketing around two percent in the week gone by and they largely indulged in stock specific activities amid a weak global trend. Sentiments remained dismal with the private report indicating that India's GDP growth numbers are expected to see a decline of 2% in the third and fourth quarters of the current fiscal, as effective currency in circulation has contracted significantly. The report stated that the government's decision to abolish old stock of high denomination currency (demonetization) and issue new notes (remonetisation) could have a mixed impact on the macro economy over a year. Besides, depreciation in rupee value also weighed on the sentiment. However, losses remained capped with report that the Index of Industrial Production (IIP) rose to a 13-month high of 5.7% in November, belying expectations of an adverse impact from demonetization and against a contraction of 1.8% in October. Also, the Inflation measured by the Consumer Price Index (CPI) eased to 3.41% in December versus 3.63% seen in November 2016, mainly due to softening of food prices. Some support also came with the report saying that India grew fastest among major economies worldwide at over 7.5 per cent in 2016 and will continue to drive global growth in 2017 with its share in the world GDP expected to rise to 17 per cent. On the global front, Asian markets ended mostly lower on Friday as investors weighed whether President-elect Donald Trump would stress growth-boosting steps when he takes office. Back home, finally, the BSE Sensex declined by 9.10 points or 0.03% to 27238.06, while the CNX Nifty was down by 6.85 points or 0.08% to 8,400.35.     

 

Wall Street ended mostly in green on Friday as traders digested weak economic data. The Commerce Department released a report showing that retail sales rose by slightly less than expected in the month of December. The Commerce Department said retail sales climbed by 0.6 percent in December after edging up by a revised 0.2 percent in November. Economists had expected retail sales to increase by 0.7 percent. Excluding auto sales, retail sales inched up by 0.2 percent in December after rising by 0.3 percent in November. Ex-auto sales had been expected to climb by 0.5 percent. A separate report from the Labor Department showed that producer price growth came in line with economist estimates in December. The Labor Department said its producer price index for final demand rose by 0.3 percent in December after climbing by 0.4 percent in November. Excluding food and energy prices, core producer prices edged up by 0.2 percent in December after rising by 0.4 percent in November. Core prices had been expected to inch up by 0.1 percent. The University of Michigan also released a report showing that its consumer sentiment index unexpectedly edged down to 98.1 in January from 98.2 in December. Nasdaq surged 26.63 points or 0.48 percent to 5,574.12 and S&P 500 was up by 4.20 points or 0.18 percent to 2,274.64, while Dow Jones Industrial Average slipped 5.27 points or 0.03 percent to 19,885.73.

 

Crude oil futures declined on Friday, amid lingering doubts that OPEC will curb supplies and despite report of decline in US rig counts. Oil-field services company Baker Hughes Inc. reported that the number of active US rigs drilling for oil fell by 7 to 522 rigs this week. The count had risen ten weeks in a row. However, the number of gas rigs rose for a twelfth week in a row. There was concern with reports that Organization of Petroleum Exporting Countries (OPEC) said that production cuts likely won't go as planned by the oil cartel. While Saudi Arabia is said to have implemented quotas, Libya and Iraq are among the OPEC members that are reportedly resisting the output reductions. Benchmark crude oil futures for February delivery was down by $0.64 or 1.2 percent to $52.37 on the New York Mercantile Exchange. In London, Brent crude for March delivery ended lower by $0.56 or 1.18 percent at $55.45 on the ICE.

 

Indian rupee ended weaker against the US dollar on increased demand of the greenback from the importers and the banks. The domestic currency remained weak since opening tracking weakness in the other Asian currency markets. Sentiments remained subdued with the private report indicating that India's GDP growth numbers are expected to see a decline of 2% in the third and fourth quarters of the current fiscal, as effective currency in circulation has contracted significantly. Local currency was unable to get any support with report that the Index of Industrial Production (IIP) rose to a 13-month high of 5.7% in November, belying expectations of an adverse impact from demonetization and against a contraction of 1.8% in October. On the global front, dollar inched up from a five-week low against yen and steadied against the broader basket of currencies on Friday. Finally, the rupee ended at 68.15, 7 paise weaker from its previous close of 68.08 on Thursday.

 

The FIIs as per Friday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3316.38 crore against gross selling of Rs 3318.01 crore, while in the debt segment, the gross purchase was of Rs 712.55 crore with gross sales of Rs 791.43 crore.

 

The US markets made a mixed closing in last session before going for a long weekend. The Asian markets have made mostly a lower start with some indices showing cut of around a percent in early deals. Haven assets demand increased across the region on a report that U.K. Prime Minister Theresa May will signal plans to quit the European Union's single market to regain control of Britain's borders and laws. The Indian markets after a choppy session and some attempt of recovery in the final hours ended modestly in red in last session, the positive macro data helped the markets from declining further. Today the start of the new week is likely to remain cautious and a mildly soft start can be expected on weak regional cues, though all eyes will be on earnings season and WPI inflation data slated to be announced later in the day. Market heavyweight Reliance Industries (RIL) will be announcing its Q3 numbers and expectations are that it will likely post good sequential growth in standalone net profit for the quarter ended December 2016. Traders will be eyeing any development on GST front, as Finance Minister Arun Jaitley in order to ensure smooth passage of GST, will look forward to breaking the deadlock over power distribution between centre and states in the ninth meeting of GST Council. Marketmen may get some support with report that exports jumped for the fourth month to 5.7 per cent in December to $23.8 billion, the highest since March 2015. As many as 18 of the 30 exporting sectors registered growth. The public sector banks (PSBs) will be in action on report that the Finance Ministry is likely to finalise capital infusion plan for PSBs this week. There will be some buzz in the PSU oil marketing companies, as the Petrol price has been hiked by 42 paisa a litre and diesel by Rs 1.03 per litre by the state oil companies.

 

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

8400.35

8361.98

8449.88

BSE Sensex

27238.06

27100.84

27417.52

 

Nifty Top volumes

 

Stock

Volume

(in Lacs)

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

IDEA

269.44

68.80

66.07

71.77

Hindalco

174.30

172.25

169.13

177.08

Infosys

156.38

975.80

945.67

1022.97

Power Grid

134.62

197.15

195.50

199.35

Axis Bank

126.93

472.80

460.27

480.27

 

  • Bharti Airtel's wholly owned subsidiary - Airtel Payments Bank, has commenced national operations with services now live in all 29 states of India.
  • Bank of Baroda has opened its 306th branch in the Bengaluru zone at Whitefield.
  • Infosys has reported 13.78% rise in its net profit at Rs 3599 crore for the quarter ended December 31, 2016 as compared to Rs 3163 crore for the same quarter in the previous year.
  • Hero MotoCorp has unveiled the New Glamour - its first-ever Global Launch of a new product outside of India.
  • IDEA Cellular has decided to raise Rs 500 crore via non-convertible debentures.
News Analysis