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Market Commentary 15 June 2018
Markets to make flat-to-negative start amid mixed global cues

 

Thursday turned-out to be a dismal day of trade for Indian equity benchmarks, where frontline gauges snapped their three days winning streak to end below their crucial  35,600 (Sensex) and 10,850 (Nifty) levels after the US Federal Reserve raised borrowing costs and struck a hawkish tone in its latest policy statement. Markets started the session on a pessimistic note with report showing that the country's current account deficit (CAD) rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth and final quarter (Q4 of 2017-18), compared to $2.6 billion (Rs 176 billion and 0.4 per cent of GDP) in the same period of 2016 -17. Traders also remained concerned on report that Reserve Bank of India to hike rates once again at its August monetary policy review as headline inflation surging to a four-month high of 4.87 per cent in May. Markets extended losses due to higher Wholesale Price Index (WPI) data. India's wholesale inflation shot up to a 14-month high of 4.43 percent in May on increasing prices of petrol and diesel as well as vegetables. The WPI based inflation stood at 3.18 percent in April and 2.26 percent in May last year. Some anxiety also persist among investors with a private report stating that the Centre and some states strongly disagree on the inclusion of certain petroleum products -- natural gas and aviation turbine fuel -- under the ambit of Goods and Services Tax (GST). Sentiments also remained pessimistic with State Bank of India's (SBI) latest report stating that India has only a decade to get into the developed country tag. However, markets managed to prune some of their losses in last leg of trade as market participants took some solace with report that Fitch Ratings raised India growth forecast for 2018-19 to 7.4 per cent from 7.3 per cent, but cited higher financing costs and rising oil prices as risks to growth. For 2019-20, it estimated the country to grow at 7.5 per cent. Traders also get some relief with Commerce and industry minister Suresh Prabhu's statement that India's purchases of commercial aircraft and gas from the US would help bridge the trade deficit between the two countries even as they agreed to hold official talks soon to address trade and economic irritants between them. Finally, the BSE Sensex declined 139.34 points or 0.39% to 35,599.82, while the CNX Nifty was down by 48.65 points or 0.45% to 10,808.05.

 

The US markets ended mostly higher on Thursday as markets get accustomed to the idea of investing with less of a safety net from central banks around the world. Sentiments remained up-beat with European Central Bank detailing a timeline for its bond-buying program, as well as its interest-rate policy. Traders digested the European Central Bank's highly anticipated monetary policy announcement, with the ECB revealing plans to wind down its massive bond-buying program. The ECB is planning to trim the monthly pace of its net asset purchases to 15 billion euros from 30 billion euros after September before completely ending the program at the end of December. Meanwhile, the ECB left interest rates unchanged and said it expects rates to remain at their present levels at least through the summer of 2019. Buying was also witnessed after release of some upbeat economic data, including a report from the Commerce Department showing a much bigger than expected increase in retail sales in the month of May. The Commerce Department said retail sales jumped by 0.8 percent in May after climbing by an upwardly revised 0.4 percent in April. Economists had expected retail sales to rise by 0.4 percent. The Nasdaq gained 65.34 points or 0.9 percent to 7,761.04 and the S&P 500 advanced 6.86 points or 0.30% to 2,782.49 while the Dow Jones Industrial Average was down by 25.89 points or 0.10 percent to 25175.31.

 

Extending its northward journey for the fourth consecutive session, Crude oil futures rose on Thursday, logging their highest settlement in two weeks, buoyed by a hefty weekly decline in U.S. crude supplies, though the rise was modest given a climb in last week's domestic production to a record level. The global crude benchmark, meanwhile, gave up nearly all of the gains it saw a day earlier on the possibility that the Organization of the Petroleum Exporting Countries (OPEC) will decide to boost output when members and other major oil producers meet next week. Benchmark crude oil futures for July delivery surged 25 cents or 0.4 percent to settle at $66.89 a barrel on the New York Mercantile Exchange. August Brent crude declined 80 cents or 1% at $75.94 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended marginally higher against dollar on Thursday, as bankers and exporters took to selling of American currency. Market participants took some support with report that Fitch Ratings raised India growth forecast for 2018-19 to 7.4 per cent from 7.3 per cent, but cited higher financing costs and rising oil prices as risks to growth. For 2019-20, it estimated the country to grow at 7.5 per cent. Besides, the dollar losing muscle against other currencies overseas also supported the rupee. However, gains were limited as some concerns remained among the investors with report showing that the country's current account deficit (CAD) rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth and final quarter (Q4 of 2017-18), compared to $2.6 billion (Rs 176 billion and 0.4 per cent of GDP) in the same period of 2016 -17. On the global front, euro firmed up against dollar on Thursday, ahead of a policy announcement from the European Central Bank, which may outline the bank's plans for winding down its bond-buying program. Finally, the rupee ended at 67.63, 1 paise stronger from its previous close of 67.64 on Wednesday.

 

The FIIs as per Thursday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 5039.64 crore against gross selling of Rs 4864.95 crore, while in the debt segment, the gross purchase was of Rs 1485.66 crore with gross sales of Rs 2819.07 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.15 crore against gross selling of Rs 2.87 crore.

 

The US markets ended mostly higher on Thursday, after the European Central Bank said it would avoid raising interest rates until mid-2019, and data showed US economic strength. Asian markets were trading mostly in red on Friday as investors awaited developments on the trade front ahead of the expected unveiling of US tariffs targeting China. Snapping three-day winning streak, Indian markets ended lower on Thursday, after the US Federal Reserve lifted interest rates for the second time this year and signaled a more aggressive rate path for the rest of the year. Today, the markets are likely to make cautious start, tracking mixed global cues and a firmer dollar as the Trump administration readies tariffs on Chinese goods. Sentiments may remain dampen on private report that the record low equity risk premium and the gap between earnings yield and the bond yields are making it cautious on the Indian equity market. However, traders may get some solace later in the day with India's Oil Minister Dharmendra Pradhan conveyed India's concerns when he met ambassadors of OPEC countries in India over high international oil prices. Meanwhile, after implementing GST from July 1, 2017, the government had allowed use of stickers with revised rates, alongside the printed MRP for pre-packaged items to reflect changes in selling price for three months till September 30. The deadline has been extended several time and the latest was April 30. There will be buzz in stocks related to insurance sector with report that insurance regulator IRDAI is probing suspected illegal practices by some private sector insurers and their partner banks in bancassurance channels. Bancassurance refers to selling of insurance policies through banks, wherein these lenders earn revenue through such sales.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,808.05

10,776.50

10,836.65

BSE Sensex

35,599.82

35,475.62

35,736.95

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

SBI

185.14

282.6

280.42

285.67

Sun Pharma

121.54

559.25

546.83

566.83

ICICI Bank

114.01

284.75

282.28

289.03

ITC

91.70

267.25

265.87

268.77

Vedanta

89.30

240.05

238.27

242.67

 

  • Cipla has received final approval for its ANDA for Isoproterenol Hydrochloride Injection USP, 0.2mg/mL, single-use sterile Ampoule from the US FDA. 
  • Bharti Airtel is planning a capex of Rs 24,000 crore in FY19 to stay ahead in the 4G game and become the primary SIM for subscribers. 
  • HDFC Bank has received government's approval to raise additional capital Rs 24,000 crore by selling equity to foreign investors to fund its business growth. 
  • Wipro and LATAM Cargo have entered into partnership for a multi-year cargo management engagement.
News Analysis