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Market Commentary 29 August 2019
Benchmarks to make pessimistic start amid weakness in Asian peers

 

Indian equity bourses snapped 3-day gaining streak to close on lackluster note, with the Sensex and the Nifty losing around half a percent each. The start of the day was a cautious, impacted with Moody's Investors Service's statement that the economic measures announced by Finance Minister Nirmala Sitharaman are unlikely to provide some form of confidence and improve business sentiment and consumer sentiment. Moody's, which has lowered India's gross domestic product (GDP) forecast to 6.4% for FY20, said there is significant uncertainty in terms of the growth prospects both because of domestic as well as external factors. Market participants rolled-over their positions ahead of the August Futures & Options (F&O) series expiry due on Thursday. Weakness continued over the street in the second half of the session, on the back of mixed cues from global markets. Domestic sentiments remained pessimistic, as India Ratings and Research (Ind-Ra) revised India's gross domestic product (GDP) growth in current financial year downwards to 6.7 per cent -- marking a six-year low -- from its earlier forecast of 7.3 per cent. The agency expects FY20 to be the third consecutive year of subdued growth pushed by a slowdown in consumption demand, delayed and uneven progress of monsoon so far, decline in manufacturing growth, inability of Insolvency and Bankruptcy Code to resolve cases in a time-bound manner and rising global trade tension adversely impacting exports. Finally, the BSE Sensex lost 189.43 points or 0.50% to 37,451.84, while the CNX Nifty was down by 59.25 points or 0.53% to 11,046.10.

 

The US markets ended higher on Wednesday as the energy sector got a lift from higher oil prices. Oil jumped after the Energy Information Administration said US crude inventories plummeted by 10 million barrels last week, the largest drop in five weeks. Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 3.6 percent, the NYSE Arca Natural Gas Index surged up by 2.4 percent and the NYSE Arca Oil Index advanced by 1.7 percent. Significant strength also emerged among transportation stocks, as reflected by the 1.8 percent jump by the Dow Jones Transportation Average. Besides, the rebound on markets also came as bond yields climbed off their worst levels of the session, although they remained negative. Earlier in the day, the negative spread between the ten-year and two-year yields widened to its lowest level since 2007, with an inverted yield curve widely seen as an indicator that a US recession is looming. The White House has sought to downplay recession concerns, although the inverted yield curve combined with the escalating US-China trade war have generated considerable uncertainty on Wall Street. Meanwhile, the US is scheduled to impose the first stage of US tariffs on $300 billion worth of Chinese goods on September 1. China is set to respond with tariffs on US products on the same day. Dow Jones Industrial Average surged 258.20 points or 1.00 percent to 26036.10, Nasdaq rose 29.94 points or 0.38 percent to 7856.88 and S&P 500 was up by 18.78 points or 0.65 percent to 2887.94.

 

Crude oil futures ended higher on Wednesday, buoyed by data showing a significant drop in US crude stockpiles last week. The Energy Information Administration (EIA) reported that US crude supplies fell by 10 million barrels for the week ended August 23. That was the biggest one-week decline reported by the government agency since the 10.8 million-barrel fall for the week ended July 19. Analysts polled by S&P Global Platts, on average, expected a decline of 4.7 million barrels, while the American Petroleum Institute on Tuesday reported an 11.1 million-barrel decrease. The EIA data also showed that gasoline and distillate inventories each fell by 2.1 million barrels last week. Benchmark crude oil futures for October gained 85 cents or 1.6 percent to settle at $55.78 a barrel on the New York Mercantile Exchange. October Brent surged 98 cents or 1.7 percent to settle at $60.49 a barrel on London's Intercontinental Exchange.

 

Reversing previous session's strong gains, Indian rupee ended weaker against the US dollar on Wednesday, on the back of consistent demand for the greenback from state-run banks and importers. Sentiments remained down-beat with India Ratings and Research (Ind-Ra) revising India's gross domestic product (GDP) growth in current financial year downwards to 6.7 per cent -- marking a six-year low -- from its earlier forecast of 7.3 per cent. The agency expects FY20 to be the third consecutive year of subdued growth pushed by a slowdown in consumption demand, delayed and uneven progress of monsoon so far, decline in manufacturing growth, inability of Insolvency and Bankruptcy Code to resolve cases in a time-bound manner and rising global trade tension adversely impacting exports. Besides, a weak trend at Dalal Street coupled with US dollar's gain against other currencies overseas weighed on the local unit. On the global front, pound slumped against dollar on Wednesday as Britain's government moved to extend the suspension of parliament, increasing the likelihood of a no-deal Brexit. Finally, the rupee ended at 71.77, 29 paise weaker from its previous close of 72.48 on Tuesday.

 

The FIIs as per Wednesday'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 13358.46 crore against gross selling of Rs 14418.66 crore, while in the debt segment, the gross purchase was of Rs 3847.98 crore with gross sales of Rs 1274.03 crore. Besides, in the hybrid segment, the gross buying was of Rs 14.22 crore against gross selling of Rs 15.33 crore.

 

The US markets ended in green on Wednesday amid light trading as investors awaited new developments in the increasingly unpredictable Sino-American trade war. Asian markets are trading lower on Thursday as investors continue to watch the yield curve in US Treasuries, which inverted further overnight. Indian markets snapped three-day winning streak and settled lower on Wednesday with cut of around half a percent each, led by declines in banking, auto and metal shares, amid weak global cues. Today, the start of the F&O series expiry session is likely to be negative amid subdued cues from Asian peers. There will be some cautiousness as India Ratings lowered the country's growth forecast to six-year low of 6.7% for the current fiscal from an earlier estimate of 7.3% on account of slowdown in consumption and moderation in industrial growth among other factors. This would be the third consecutive year of subdued growth. Traders will also be concerned with a private report indicating that the Indian economy likely expanded at its slowest pace in more than five years in the April-June quarter, driven by weak investment growth and sluggish demand. However, some support may come later in the day as to boost the ailing economy, the government on relaxed foreign direct investment (FDI) rule for foreign single-brand retailers and also permitted foreign investment in contract manufacturing and coal mining. In the first decision, the cabinet has allowed online retailing under single-brand retail and relaxed rules for complying with the mandatory 30% local sourcing norms by foreign single-brand retailers. In the second decision, 100% FDI in contract manufacturing under automatic route has been allowed and 26% FDI has been allowed in digital media. There will be some reaction in metal stocks with the World Steel Association's report that India's crude steel output increased by 1.7% to 9.215 million tonne in July 2019 as compared to  9.059 MT during the same month a year ago. Sugar stocks will be in focus as the government approved Rs 6,268 crore export subsidy for 60 lakh tonnes of sugar. A lump sum export subsidy of Rs 10,448 per tonne will be given to sugar mills in the 2019-20 marketing year (October-September), costing the exchequer Rs 6,268 crore as a subsidy.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,046.10

10,979.28

11,121.28

BSE Sensex

37,451.84

37,238.08

37,676.71

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

2,231.68

59.50

56.65

63.75

Tata Motors

742.46

116.35

112.77

121.97

Indiabulls Housing Finance

195.89

457.25

445.38

471.23

SBI

189.80

284.90

282.52

286.97

Tata Steel

126.42

336.95

329.93

347.43

 

  • Power Grid has received approval for investment in Transmission System for Solar Energy Zones in Rajasthan, at an estimated cost of Rs 2,578.47 crore with commissioning schedule as December, 2020. 
  • Vedanta has collaborated with government think-tank Niti Aayog to help improve the quality of life of the people of Kalahandi district of Odisha. 
  • Infosys has entered into collaboration with Microsoft and JCI to deliver smart buildings and spaces solutions that will accelerate the convergence of physical and digital infrastructure. 
  • Maruti Suzuki India has launched a distinctive initiative Service on Wheels.
News Analysis