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NSE Intra-day chart (28 May 2020)
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Market Commentary 29 May 2020
Markets to get pessimistic start amid weak global cues

 

Extending their previous session's rally, Indian equity benchmarks witnessed remarkable day of trade with frontline gauges garnering a gain of around two percent each on Thursday. Markets started the session on optimistic note with Commerce and industry minister Piyush Goyal's statement that worst for the economy is over and revival is in the air. Traders took some support with former RBI governor Duvvuri Subbarao said that the country's economy is likely to decline by 5 percent in the current fiscal but may expand by around 5 percent in the next financial year. Traders overlooked SBI Ecowrap report stating that as the coronavirus pandemic and the nationwide lockdown severely impact the economy, India's gross domestic product for the first quarter of the financial year 2020-21 is likely to contract by over 40 per cent. Also, market participants paid no heed to S&P Global Ratings' statement that the Indian economy will shrink by 5 per cent in the current fiscal as it joined a chorus of international agencies that are forecasting a contraction in growth rate due to coronavirus lockdown halting economic activity. Markets continued to trade upward to end near intraday high levels. Traders took note of report that India may need to inject up to Rs 1.5 lakh crore rupees ($19.81 billion) into its state-owned lenders as their pile of soured assets is expected to double during the coronavirus pandemic. Separately, a report stated that with 7,260 cases, India has recorded its biggest single-day spike in total number of coronavirus cases to 158,086 - just a shade behind Turkey. Worldometer data also suggests that the country has seen 190 new deaths in the past 24 hours due to the infection. With this, India's death toll has risen to 4,534. Among states, Maharashtra has the highest number of Covid-19 cases, at 56,948. Finally, the BSE Sensex gained 595.37 points or 1.88% to 32200.59, while the CNX Nifty was up by 175.15 points or 1.88% to 9490.10.

 

The US markets ended lower on Thursday with gains evaporating within the final hour of trade as markets digested a report that President Donald Trump was set to hold a news conference on China on Friday. Word of an event comes as tensions between China and the US have ratcheted higher, particularly as Beijing was seen threatening the autonomy of Hong Kong. The US on Wednesday said it no longer considered Hong Kong highly autonomous under a 1992 law, a move that could lead to measures to limit Hong Kong's trade privileges and open the door to sanctions against individuals the US sees as suppressing civil liberties in the territory. Also, the governments of the US, Australia, Canada and the UK issued a joint statement reiterating their deep concern regarding Beijing's decision to impose a national security law on Hong Kong, after China's parliament, the National People's Congress passed legislation that could greatly curtail democratic freedoms. On the economic data front, a report released by the Labor Department showed a continued decrease in first-time claims for US unemployment benefits in the week ended May 23. The Labor Department said initial jobless claims dropped to 2.123 million, a decrease of 323,000 from the previous week's revised level of 2.446 million. Street had expected jobless claims to fall to 2.100 million from the 2.438 million originally reported for the previous week. Meanwhile, pending home sales in the US plunged by more than expected in the month of April, the National Association of Realtors (NAR) revealed in a report.  NAR said its pending home sales index plummeted by 21.8 percent to 69.0 in April after tumbling by 20.8 percent to 88.2 in March. Street had expected pending home sales to slump by 15.0 percent.

 

Crude oil futures ended higher on Thursday waving off data that showed an unexpected rise in US crude inventories as traders focused on a fall in gasoline stocks and a further decline in crude stored at the New York Mercantile Exchange's delivery hub in Cushing, Oklahoma. The Energy Information Administration (EIA) said inventories rose 7.9 million barrels in the week ended May 22 as against expectations of a near 2-million barrels drop. Meanwhile, gasoline stocks fell 700,000 barrels, beating expectations for an increase of 100,000 barrels. Distillate stockpiles were up 5.5 million barrels in the week, about three times the expected jump. Crude supplies at Cushing, Oklahoma, the New York Mercantile Exchange delivery hub, fell 3.4 million barrels. Crude oil futures for July rose 90 cents or 2.7 percent to settle at $33.71 a barrel on the New York Mercantile Exchange. August Brent crude gained 55 cents or 1.6 percent to settle at $35.29 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker against US dollar on Thursday, due to fresh demand for the American currency from banks and importers. Investors' sentiment remained fragile with S&P Global Ratings' latest report stating that the that Indian economy is expected to contract 5 per cent in the current fiscal year (FY21) as the lockdown imposed to contain COVID-19 pandemic has curtailed economic activity severely. However, gains in domestic equity markets provided some support to the rupee, keeping the downside in check. On the global front, euro continued to rise on Thursday, boosted by a 750 billion euro ($826.35 billion) EU plan to prop up the bloc's coronavirus-hit economies, though gains were limited as doubts about delivering the scheme crept in. Finally, the rupee ended at 75.76, 5 paise weaker from its previous close of 75.71 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 6152.98 crore against gross selling of Rs 6321.42 crore, while in the debt segment, the gross purchase was of Rs 837.17 crore with gross sales of Rs 3291.28 crore. Besides, in the hybrid segment, the gross buying was of Rs 5.85 crore against gross selling of Rs 1.06 crore.

 

The US markets ended lower on Thursday amid report that President Donald Trump announced plans to hold a news conference about China on Friday. Asian markets are trading mostly in red on Friday as investors watch for market reaction to China's controversial national security law for Hong Kong that was approved on Thursday. Indian markets ended higher for the second straight session on Thursday, with auto and banking stocks leading the rally on account of short-covering on eve of F&O derivatives expiry. Today, the start of session is likely to be negative tracking weakness in global markets. Traders will be concerned with rising coronavirus cases in India. The total number of coronavirus cases in India has jumped to 165,386. With latest spike in corona cases, India has replaced Turkey to be the ninth-most-affected nation in this pandemic. India has the 5th-highest count of active cases, fewer only than the US, Brazil, Russia and France. India has also overtaken China in death toll; Covid-19 fatalities in the country now stand at 4,710. There will be some cautiousness with Care ratings report that the country's GDP growth is likely to be at 3.6 percent in January-March 2020 as economic activity came to a complete halt due to the countrywide lockdown imposed to contain the coronavirus outbreak. Traders may take note of Fitch ratings' report that with incremental bank lending making up the bulk of the government's nearly Rs 21 lakh crore stimulus package, lenders face significant asset quality challenges which can increase their dud loan ratios by up to 6 percentage points over the next two years. Though, traders may take encouragement later in the day with Commerce and Industry Minister Piyush Goyal's statement that India's exports will improve in May compared to April when shipments contracted by a record 60.28 per cent. Some support may also come with report that foreign direct investment (FDI) in India grew by 13 percent to a record of $49.97 billion in the 2019-20 financial year, according to official data. The country had received FDI of $44.36 billion during April-March 2018-19. There will be some buzz in the auto stocks with CRISIL Research report stating that the domestic automobile industry is headed for another year of double-digit sales decline this fiscal, given the extended lockdown to contain the COVID-19 pandemic. Banking stocks will be in focus as the Reserve Bank of India (RBI) imposed a penalty of Rs 6.50 crore on Karnataka Bank, Bank of India and Saraswat Co-operative Bank for non-compliance with central bank's Income Recognition and Asset Classification norms. There will be some reaction in cement stocks with report that cement production in the country is slated to fall by 25-30 per cent this fiscal as Covid pandemic has sucked demand from end user industries.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

9,490.10

9,380.65

9,555.40

BSE Sensex

32,200.59

31,805.83

32,431.29

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Tata Motors

961.83

87.00

84.98

88.58

State Bank of India

769.70

158.20

155.80

161.50

Axis Bank

726.95

390.95

382.75

403.40

Zee Entertainment Enterprises

710.30

180.70

166.32

192.07

ICICI Bank

661.37

326.85

321.82

330.82

 

  • NTPC has decided to foray in electricity distribution business by evincing interest to buy 51 per cent stake in Anil Dhirubhai Ambani Group's two utilities in Delhi. 
  • Maruti Suzuki India has joined hands with HDFC Bank to offer bouquet of flexible finance schemes for new car buyers. 
  • Tech Mahindra and Openet have entered into a global strategic partnership to enable digital transformation for customers globally. 
  • Dr. Reddy's Laboratories has received the EIR from the USFDA, for its Integrated Product Development Organization at Medchal-Malkajgiri, Telangana.
News Analysis