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NSE Intra-day chart (21 July 2016)
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Market Commentary 22 July 2016
Markets to get a weak start on feeble global cues

 

Indian stock indices showed a disappointing performance on Thursday's trading session after a resilient show in previous trade. Sentiments remained under pressure with the Moody's Investors Service's report indicating the growth in debt levels over the decade-mainly driven by private debts, making emerging market economies vulnerable to external shocks. According to Moody's report, the average external debt to gross domestic product ratio for Asia as a whole has increased from 31 per cent in 2008 to 47 per cent in 2015. The largest surge was reported in external borrowings in China, India, Indonesia, Taiwan and Malaysia.  Further, market participants turned jittery with the Finance Minister Arun Jaitley's statement that India has underlined the need for a judicious mix of fiscal, monetary and structural policies by major economies to deal with the heightened uncertainty on account of Brexit. Weak trend in European stocks coupled with depreciation in rupee value against the US dollar also weighed on the sentiment. However, investors got some comfort with the private report indicating Inflation in India to fall to 4.5 per cent by next March, giving the Reserve Bank of India (RBI) space to cut key policy rates by 50 basis points in the current fiscal. Some support also came after international credit rating agency Standard & Poor's (S&P) striking a buoyant note, penciling in an 8 percent growth for India in the next two years. According to S&P, the view is predicated on the steady, ongoing structural reform push, including GST passage, a good monsoon season this year, and a wise choice to head the Reserve Bank. On the global front, Asian markets ended mostly higher on Thursday, however, Europe edged lower in early trade. Back home, after getting a fragile start, Indian benchmark indices traded near neutral line through the morning trade, but sentiments turned pessimistic in noon post weak opening of European markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads.  The selling pressure accentuated in the late afternoon trades as investors took to across the board risk aversion. Finally, the BSE Sensex ended lower by 205.37 points or 0.74% to 27710.52, while the CNX Nifty dropped 55.75 points or 0.65% to 8,510.10. 

                                               

The US markets closed lower on Thursday, with the Dow industrials snapping a nine-day string of gains, as a hot equity market cooled ahead of key central-bank meetings. At least 15 central banks are scheduled to hold policy meetings in the next few days with the Federal Reserve's Federal Open Market Committee conference set for July 26-27. The Fed is widely expected to hold rates unchanged, but policy makers may hint at a rate increase in coming months, possibly as soon as September. On the economy front, activity of US manufacturers in the Philadelphia region contracted in July, suggesting the hard-hit sector continues to struggle. The Philadelphia Federal Reserve's index of business conditions declined to negative 2.9 this month from positive 4.7 in June. This is the ninth month of declining activity of the past 11 months and the slowest pace in six months. The headline of the Philly Fed survey dovetailed with a similar report by New York Fed, known as the Empire State index, which was a positive but meager 0.6 in July. This was led by improvements in production related indicators. The Dow Jones Industrial Average was down by 77.80 points or 0.42 percent to 18,517.23, Nasdaq lost 16.03 points or 0.31 percent to 5,073.90 while, S&P 500 dropped 7.85 points or 0.36 percent to 2,165.17. 

 

Crude oil futures after a day of mild recovery plunged again on Thursday, on concerns related to the supply glut in crude and refined product remained in focus. There were reports that Nigeria, Canada and Iran are ramping up production after supply interruptions, while US rig counts are seen rising yet again this week. Traders largely shrugged off yesterday's EIA data showing another drop in US oil inventories. Benchmark crude oil futures for September delivery was down by 1.06 or 2.32 percent to close at $44.70 a barrel after trading in a range of $44.66 and $46.09 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for September delivery declined by $1.03 or 2.18 percent to $46.15 a barrel on the ICE.

 

Indian rupee ended flat on Thursday due to mild dollar demand from banks and importers. Investors remained cautious with the Finance Minister Arun Jaitley's statement that India has underlined the need for a judicious mix of fiscal, monetary and structural policies by major economies to deal with the heightened uncertainty on account of Brexit. However, sentiments got some support with the private report indicating Inflation in India to fall to 4.5 per cent by next March, giving the Reserve Bank of India (RBI) space to cut key policy rates by 50 basis points in the current fiscal.  On the global front, yen was higher against the dollar after fresh reports that the Bank of Japan may hold fire and not provide more stimulus at its policy meeting next week. Finally, the rupee ended unchanged from its previous close of 67.18 on Wednesday.

 

The FIIs as per Thursday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 4866.82 crore against gross sell of Rs 4383.70 crore. While in the debt segment, the gross purchase was of Rs 2048.13 crore with gross sales of Rs 1541.90 crore.

 

The US markets ended modestly lower in last session and the Dow snapped a nine-session streak of gains, mainly on weak set of earnings led by tech stalwart Intel and from transportation companies. Traders also reacted to the European Central Bank's first monetary policy decision since Britain's vote to leave the European Union, where it left interest rates unchanged. The Asian markets have made a weak start and some of the indices are down by over half a percent, tailing the decline in US markets overnight, as prospects for central bank stimulus in Japan cooled after ECBs decision. The Indian markets completely lost the momentum in second half of the last session and suffered cuts of over half a percent. Today, the start is likely to remain soft on sluggish global cues. Though, there will be some support with a private poll stating that India's economy will hum along at a solid pace for the remainder of this fiscal year provided structural reforms are passed, while above-target inflation means the Reserve Bank of India will only cut rates once more this year. Meanwhile, Finance Minister Arun Jaitley has said that India has underlined the need for a judicious mix of fiscal, monetary and structural policies by major economies to deal with the heightened uncertainty on account of Brexit. He said that governments, Central Banks and regulators have to mitigate the pressure of such vulnerabilities through judicious mix of fiscal, monetary and structural policies. The infra sector stocks will be in action, with the CII infra panel urging the government to speed up the recommendations of Kelkar committee report based on interactions with private sector developers, bankers, regulators, private equity funds. There will be lots of earnings announcements, while the whole FMCG pack is likely to remain under pressure after ITC came up with a below estimate earnings in June quarter.

 

                         Support and Resistance: CNX Nifty and BSE Sensex

Index

Previous close

Support

Resistance

CNX Nifty

8510.10

8480.62

8562.42

BSE Sensex

27710.52

27602.45

27903.67

 

Nifty Top volumes

Stock

Volume

(in Lacs)

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

State Bank of India

304.46

225.65

222.67

230.37

ITC

293.71

250.60

246.90

253.90

Hindalco

151.35

133.90

132.43

136.43

ICICI Bank

290.14

261.90

259.13

266.83

Axis Bank

513.45

538.05

529.77

552.12

  • HDFC Bank has reported 20.15% rise in its net profit at Rs 3238.91 crore for the quarter as compared to Rs 2695.72 crore for the same quarter in the previous year.
  • Kotak Mahindra Bank has reported around four fold jump in its net profit at Rs 741.97 crore for the quarter ended June 30, 2016 as compared to Rs 189.78 crore for the same quarter in the previous year.
  • State Bank of India, the country's largest lender, has inked a MoU with Indian Railway Catering and Tourism Corporation on July 18, 2016, to chalk out a detailed plan for promotion of rail ticketing activities, including internet ticketing and unreserved ticketing system.
  • Wipro has entered into a seven-year strategic IT and Business transformation partnership with the Greater Toronto Airports Authority.
  • Ambuja Cements has received approval from the Cabinet Committee on Economic Affairs for its proposal to acquire 24 percent stake in its holding company Holcim (India) through Holderind Investment by way of subsequent reverse merger through a share swap.
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