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NSE Intra-day chart (25 February 2020)
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Market Commentary 26 February 2020
Markets to get pessimistic start amid global sell-off


Indian equity benchmarks ended Tuesday's volatile session in red terrain. The start of the day was on positive note, aided with the Reserve Bank of India (RBI) Governor Shaktikanta Das' statement that there is space for further rate cuts despite upside risks to the inflation outlook. Indices remained in green for the most part of the day, after Niti Aayog's National Committee on Financial Inclusion and Literacy's chairperson Bindu Dalmia said that the government's target of achieving a $5 trillion economy by 2024-25 sounds too idealistic. She added that the target has been so set to raise the bar of India's economic performance. However, volatility witnessed over the Dalal Street which pushed markets to alter between green & red terrains, on account of mixed cues from the global markets. Market participants overlooked reports that Securities and Exchange Board of India (SEBI) has reviewed the margin framework for cash and derivatives segments. The move has been taken to keep pace with the changing market dynamics and to bring more efficiency in the risk management framework. The framework, which has been prepared in consultation with the capital markets regulator's Risk Management Review Committee, will come into effect from May 1, 2020. Finally, the BSE Sensex slipped 82.03 points or 0.20% to 40,281.20, while the CNX Nifty was down by 31.50 points or 0.27% to 11,797.90.


The US markets once again ended deeply in red on Tuesday, following the sell-off seen in the previous session, after the Centers for Disease Control and Prevention warned Americans to prepare for a coronavirus outbreak and investors attempted to assess the impact of the epidemic in China on global trade and travel. The number of worldwide cases of COVID-19 continues to rise. There are now 80,238 cases in 34 countries and at least 2,700 deaths, according to the World Health Organization (WHO). South Korea raised its coronavirus alert to the highest level, with the latest spike in numbers bringing the total infected to more than 800. Meanwhile, Italy has been the worst affected country outside of Asia, with more than 130 reported cases and seven deaths. Iran also confirmed 12 deaths. The US Department of Health & Human Services called for $2.5 billion of additional federal funds to help combat the coronavirus, including to stockpile surgical masks and to work on a potential vaccine, which government agencies said likely would not be available to the public for another 12 to 18 months. On the economic data front, data released by the Conference Board showed consumer confidence in the US improved slightly in the month of February. The Conference Board said its consumer confidence index inched up to 130.7 in February from a downwardly revised 130.4 in January. On the other hand, the report said the present situation index tumbled to 165.1 in February from 173.9 in the previous month. 


Crude oil futures ended lower on Tuesday, extending the notable pullback seen over previous sessions, as worries about the spread of coronavirus (COVID-19) outside China, and the impact on energy demand. The spread of the disease outside of the China and fears it could have further implications for supply chains and the global economy have contributed to recent weakness, alongside uncertainty over the ability of the Organization of the Petroleum Exporting Countries (OPEC), and its allies to respond with additional production cuts amid signs of strain between Saudi Arabia and Russia. OPEC and its allies will meet late next week to discuss demand and production levels. Crude oil futures for April fell $1.53 or 3 percent to settle at $49.90 a barrel on the New York Mercantile Exchange. April Brent crude dropped $1.35 or 2.4 percent to settle at $54.95 a barrel on London's Intercontinental Exchange.


Indian rupee appreciates against dollar on Tuesday, amid fresh selling of the American currency by exporters and banks. Traders took support with Niti Aayog's National Committee on Financial Inclusion and Literacy's chairperson Bindu Dalmia statement that the government's target of achieving a $5 trillion economy by 2024-25 sounds too idealistic. She added that the target has been so set to raise the bar of India's economic performance. However, upside remain capped with Reserve Bank of India Governor Shaktikanta Das' statement that slowing credit growth is one of the most critical challenges for the banking industry and there is a need to focus on prudent lending by the banks. So far this year, credit growth in the country has moderated to 7-7.5 per cent. On global front, US dollar stayed soft on Tuesday amid expectations that the Federal Reserve may cut interest rates this year to curb downside pressure on the economy caused by China's coronavirus outbreak. The last traded price of rupee was 71.88, 7 paise stronger from its previous close of 71.95 on Monday.


The FIIs as per Tuesday's data were net sellers in both equity and debt segments. In equity segment the gross buying was of Rs 5997.65 crore against gross selling of Rs 7733.32 crore, while in the debt segment the gross purchase was of Rs 1507.25 crore with gross sales of Rs 4694.35 crore. Besides, in the hybrid segment the gross buying was of Rs 500.01 crore against gross selling of Rs 16.00 crore.


The US markets ended lower on Tuesday as investors absorbed increasingly worrisome forecasts about the coronavirus, which is spreading faster and more broadly than initially thought and is renewing recession anxiety. Asian markets are trading in red in early deals on Wednesday in the wake of a further escalation in coronavirus cases in South Korea, Asia's fourth-largest economy. Indian markets ended highly volatile session in red on Tuesday, extending their losses for third day, as investors continued to weigh the financial impact of the coronavirus pandemic on the global economy. Today, the markets are likely to get negative start tracking sell-off in the global markets. There will be some cautiousness with Care Ratings report that it has projected Gross Domestic Product (GDP) growth of 4.5% for Q3-FY20, which is lower than 6.6% GDP growth recorded in the corresponding period a year ago. For the full year FY20, it has estimated GDP growth to be at 5% with a downward bias. Traders will also be concerned with payroll data of the Employees' State Insurance Corporation (ESIC) showing that around 12.67 lakh jobs were created in December 2019 lower against 14.59 lakh in the previous month. Though, fall in crude oil prices overnight may support the markets. Some respite may come with Crisil's report that increased demand for retail loans, strong growth in lending by private banks and pick-up in economic activity may improve credit growth to 8-9 per cent in the next financial year. Some support may also come with report that India and the US have finalised defence deals worth $3 billion, and signed three MoUs, including one in the energy sector, as Prime Minister Narendra Modi asserted that the two countries have decided to take Indo-US ties to comprehensive global partnership level. Meanwhile, amid rising instances of defaults, markets regulator SEBI has proposed a stronger framework for governing corporate bonds and debenture trustees, including enhanced disclosure requirements. Among other measures, the watchdog has suggested that NBFCs create charge on the identified assets for every bond issue. There will be some buzz in the banking stocks with Crisil Ratings' statement that a slowdown in bank lending may be bottoming out this fiscal, while gross credit off take may rise 8-9% year-on-year in fiscal 2021 backed by retail demand. There will be some reaction in the sugar stocks as industry body ISMA revised the country's sugar production upward by two per cent to 26.5 million tonnes for the ongoing 2019-20 marketing year, much lower than last year but enough to meet the local demand. 


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