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Market Commentary 13 July 2021
Markets likely to get gap-up opening amid firm global cues

 

Indian equity benchmarks wiped off morning gains to end flat on Monday, as investors awaited data on consumer price inflation (CPI) for June and industrial output for May. The benchmarks staged a gap up opening taking cues from positive global cues. Traders took encouragement with report stated that despite the worse condition due to COVID-19 which impacted economic growth, the net direct tax collection has doubled to over Rs 2.49 lakh crore so far this fiscal, mainly driven by personal income tax and advance tax mop up. Sentiments remained positive as the Confederation of Indian Industry (CII) in its latest survey report stated that India's economy is expected to see a swift recovery from the impact of the second wave of COVID-19 as lockdowns were largely designed to limit social gatherings and did not affect economic activities much. Some support also came as the Department of Economic Affairs (DEA) under the Ministry of Finance stated that the Indian economy is showing signs of revival from the second wave of the COVID-19 pandemic. It further added that healthy monsoon coverage, gradually rising Kharif sowing and unlocking of states are expected to ease inflation. However, benchmarks erased their gains and turned negative in late afternoon session amid reports that India's Covid caseload is on a downhill, but concerns over the Delta and Delta plus variants persist across the globe. Meanwhile, India has recorded 37,676 fresh cases taking the total caseload to 30,873,907, according to Worldometer. Finally, the BSE Sensex fell 13.50 points or 0.03% to 52,372.69, while the CNX Nifty was up by 2.80 points or 0.02% to 15,692.60.

 

The US markets ended higher on Monday as investors grew more optimistic ahead of second-quarter earnings reporting season set to kick off this week. JPMorgan Chase and Goldman Sachs will be among the first big companies to report Tuesday. The modestly higher close on markets reflected recent upward momentum, which has helped propel stocks to record highs despite uncertainty about the global economic outlook. Investors also anticipate important data to be released this week, including key readings on inflation on Tuesday and Wednesday, and June retail sales on Friday.  Federal Reserve chair Jerome Powell is set to testify before Congress on Wednesday and Thursday, and investors will be looking for any signals of fiscal policy updates. On the sectoral front, semiconductor stocks showed a strong move to the upside on the day, driving the Philadelphia Semiconductor Index up by 1.2 percent. Notable strength was also visible among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index rising by 1.2 percent and 1.1 percent, respectively. On the other hand, gold, networking and biotechnology stocks moved notably lower on the day, limiting the upside for the broader markets.

 

Crude oil futures ended lower on Monday amid concerns about outlook for energy demand due to the surge in the delta variant of the coronavirus and possible fresh travel restrictions in several places. Investors also fear that the lack of a new supply agreement among the OPEC and its allies could prompt major oil producers to significantly step up production much faster. Besides, finance ministers from the Group of 20 countries warned over the weekend that the global economic growth is at risk from the spike of new coronavirus variants and the low vaccine availability in developing countries. Crude oil futures for August fell $0.46 or 0.6 percent to settle at $74.10 barrel on the New York Mercantile Exchange. September Brent crude lost $0.27 or 0.36 percent to settle at $75.28 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended stronger against dollar on Monday due to fresh selling of the American currency by banks and exporters. Traders took solace with CII's latest survey report stated that India's economy is expected to see a swift recovery from the impact of the second wave of COVID-19 as lockdowns were largely designed to limit social gatherings and did not affect economic activities much. However, upside remain capped as foreign portfolio investors (FPIs) pulled out Rs 2,249 crore from the Indian equities segment in the first seven trading sessions of July. On the global front; sterling nudged lower on Monday as British Prime Minister Boris Johnson is expected to confirm plans to remove nearly all remaining COVID-19 restrictions in England from July 19, despite a surge of cases to levels unseen for months. Finally, the rupee ended 74.58, stronger by 5 paise from its previous close of 74.64 on Friday.

 

The FIIs as per Monday's data were net seller in equity segment, while net buyer in debt segment. In equity segment, the gross buying was of Rs 3968.81 crore against gross selling of Rs 4972.32 crore, while in the debt segment, the gross purchase was of Rs 588.49 crore with gross sales of Rs 507.77 crore. Besides, in the hybrid segment, the gross buying was of Rs 17.61 crore against gross selling of Rs 16.77 crore.

 

The US markets ended higher on Monday as investors awaited the start of the second-quarter earnings season and a batch of economic data to gauge the next leg of the equity market. Asian markets are trading mostly in green on Tuesday as investors awaited the release of China's trade data for June. Indian markets pared morning gains and ended flat on Monday as losses in IT and metals offset gains in banks and auto stocks. Today, the markets are likely to make gap-up opening tracking firm global cues. Traders will be taking encouragement as data released by the government showed that India's industrial production grew 29.3 per cent in May over the same period a year ago, as the impact of a favourable base continued for yet another month. Also, India's retail inflation eased slightly to 6.26 per cent in June, but stayed above the Reserve Bank's tolerance range (2 per cent-6 per cent) for the second straight month. Some support will come with a private report that the Indian economy is at the start of a virtuous cycle and on the path to becoming a $15 trillion economy over the next two decades. Traders may take note of another private report that even though the second wave of the pandemic and subsequent lockdowns affected the economic growth, the overall job postings have improved sequentially four per cent across various sectors. Meanwhile, India has recorded 30,827 fresh cases taking the total caseload to 30,904,734, according to Worldometer. The death count increased to 409,338 with 546 new fatalities, the data showed. There will be some buzz in the telecom stocks as latest TRAI data showed that Reliance Jio added 4.7 million users in April and its subscriber base swelled to 427.6 million. Vodafone Idea lost 1.8 million users and its subscriber base shrunk to 281.9 million in April, while Bharti Airtel added 0.51 million wireless customers and its user base rose marginally to 352.9 million. Media and entertainment (ME) industry stocks will be in focus with a private report that the country's ME sector will be the fastest growing globally in terms of both consumer and advertising spends, and will be an over-Rs 4-lakh-crore industry by 2025. There will be some reaction in NBFCs stocks with Crisil's report that Non-banking finance companies (NBFCs) are better placed currently on the liquidity front than they were a year ago, enabling them to service their near debt without much difficulty, despite a fall in collections because of the second wave of Covid-19. There will be some result announcements to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

15,692.60

15,628.50

15,772.95

BSE Sensex

52,372.69

52,154.27

52,645.82

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Motors

322.82

307.45

305.04

310.94

Tata Steel

166.47

1226.95

1,210.70

1,250.85

ITC

130.85

201.10

200.51

202.11

State Bank of India

128.86

427.45

424.61

430.26

JSW Steel

116.32

694.45

682.29

705.19

 

  • Maruti Suzuki India has increased price for Swift and all CNG variants owing to increase in various input costs. 
  • Tech Mahindra has entered into collaboration with enterprises, academicians, and industry advisors to constitute a Cloud Advisory Board. 
  • M&M and Magenta have declared their association to redefine last-mile deliveries in Bengaluru with Mahindra Treo Zor electric cargo vehicles. 
  • TCS is partnering with Converge ICT Solutions Inc., to help the latter further enhance the customer experience for its fast-growing subscriber base.
News Analysis