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Market Commentary 01 July 2021
Markets to make flat-to-positive start amid mixed global cues

 

Indian equity benchmarks wiped out entire intraday gains and ended marginally lower on Wednesday, as investors booked profits at higher levels. The benchmarks traded on a positive note for most part of the day, as traders took encouragement with Chief Economic Adviser (CEA) K V Subramanian's statement that a number of reforms undertaken by the government in the last one year especially focused on removing supply side frictions are expected to spur investment, including foreign investment. Sentiments remained positive as Finance Minister Nirmala Sitharaman exhorted ministries to aim to achieve more than their capital expenditure (capex) targets for this fiscal, highlighting that enhanced spending will play a critical role in revitalising the economy post-pandemic. Some support also came as the Union Cabinet may soon clear a proposal to provide government guarantee to security receipts issued by the National Asset Reconstruction Company (NARCL) as part of resolution of bad loans. Indian Banks' Association (IBA), entrusted with the task of setting up a bad bank, has pegged the government guarantee to be around Rs 31,000 crore. However, key gauges gave up gains during closing hours, as traders got anxious with the Reserve Bank of India's (RBI) data showing that credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the COVID-19 pandemic and resultant lockdowns. It said personal loans continued to grow at robust pace and recorded 13.5 per cent growth (Y-o-Y) in March 2021; industrial loan growth, on the other hand, remained negative during all quarters of 2020-21. Some cautiousness also came as a day after witnessing a sharp decline in the number of daily Covid-19 cases, India recorded 45,699 infections and 816 fatalities in the last 24 hours. The country's total coronavirus caseload stands at 30,316,000, while the death toll has jumped to 397,668. Traders took a note of minister for MSME and Road Transport and Highways Nitin Gadkari's statement that the Manufacturing sector needs to be strengthened for employment generation and eradicate poverty. Finally, the BSE Sensex fell 66.95 points or 0.13% to 52,482.71, while the CNX Nifty was down by 26.95 points or 0.17% to 15,721.50.

 

The US markets ended mostly higher on Wednesday as optimism about strong economic recovery outweighed concerns about inflation and possibility of interest rate hikes happening next year. Investors reacted to data on private sector employment, pending home sales and the reading on Chicago Business Barometer, and looked ahead to crucial non-farm payrolls data, due on Friday. Data from Automatic Data Processing, Inc. (ADP) showed private business in the US hired 692,000 workers in the month of June, higher than an expected addition of 600,000. However, the hiring in June was much below a downwardly revised 886,000 job additions in May. Data released by the National Association of Realtors (NAR) showed pending home sales in the US increased by 13.1% year-on-year in May, after soaring by a record 51.7% in April. Meanwhile, according to a report released by the Institute for Supply Management (ISM), the MNI Chicago Business Barometer came in with a reading of 66.1 for June, down from a score of 75.2 in the previous month. Though, the surge in infections due to the delta variant of the coronavirus, and curbs on travel in several countries raised some uncertainty about the pace of global economic rebound and rendered the mood cautious.

 

Crude oil futures ended higher on Wednesday lifted by data showing weekly drop in US crude inventories. Data released by Energy Information Administration (EIA) showed crude inventories in the US dropped by 6.7 million barrels in the week ended June 25, much higher than an expected drop of 4.7 million barrels. A report released by the American Petroleum Institute (API) on Tuesday that crude stockpiles in the US dropped by about 8.2 million barrels last week. Meanwhile, traders also looked ahead to the decision of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, with regard to increasing crude production from August. The OPEC+ will announce its decision on Thursday. Crude oil futures for August rose $0.49 or about 0.7 percent to settle at $73.47 barrel on the New York Mercantile Exchange. September Brent crude gained $0.34 or 0.5 percent to settle at $74.62 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker against dollar on Wednesday, on emergence of demand for the greenback from importers. Sentiments were downbeat as Reserve Bank of India in its latest data has showed that credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the COVID-19 pandemic and resultant lockdowns. It said personal loans continued to grow at robust pace and recorded 13.5 per cent growth (Y-o-Y) in March 2021; industrial loan growth, on the other hand, remained negative during all quarters of 2020-21. On the global front, dollar was heading for its biggest monthly rise since March on Wednesday, supported by traders' trepidation ahead of unpredictable U.S. labour data and concern over the spread of the Delta coronavirus variant. Finally, the rupee ended 74.32, weaker by 9 paise from its previous close of 74.23 on Tuesday.

 

The FIIs as per Wednesday's data were net buyer in equity segment, while net seller in debt segment. In equity segment, the gross buying was of Rs 10595.11 crore against gross selling of Rs 7304.94 crore, while in the debt segment, the gross purchase was of Rs 404.99 crore with gross sales of Rs 894.57 crore. Besides, in the hybrid segment, the gross buying was of Rs 92.02 crore against gross selling of Rs 94.20 crore.

 

The US markets ended mostly higher on Wednesday continuing its comeback from a steep drop in early 2020 at the onset of the coronavirus pandemic. Asian markets are trading mixed on Thursday as investors await the release of Chinese economic data. Indian markets pared morning gains and ended in the red on Wednesday weighed by banking and financial stocks as they fell sharply from the day's high. Today, the markets are likely to make flat-to-positive start of new month amid mixed macroeconomic data and lackluster global cues. Investors are looking ahead to the manufacturing PMI data to be out later in the day. Sentiments will get a boost as Principal Economic Adviser (PEA) Sanjeev Sanyal said the Indian economy is likely to witness close to double-digit growth in the current fiscal year despite the second Covid-19 wave ravaging the country. Some support will come as data released by the RBI showed India reported a current account surplus of 0.9 percent of GDP in the pandemic-hit FY21, as against a deficit of 0.9 percent in FY20.  Additionally, the finance ministry retained the interest rate on small savings schemes for the September quarter. The scheme will continue to fetch small investors better rates than other fixed income avenues such as bank fixed deposits (FDs). Traders may take note of report that India's fiscal deficit in April-May stood at 8.2 per cent of the budget estimates (BE), as compared to 59 per cent in the same period last year. The deficit was less 30 per cent less of last-year's level of Rs. 4.7 trillion amid the nationwide lockdown to contain the coronavirus. However, there may some cautiousness as with second wave nowhere close to waning, India recorded 48,878 infections and 991 fatalities in the last 24 hours. The country's total coronavirus caseload stands at 30,410,577, while the death toll has jumped to 399,475. Besides, India's eight core sectors grew 16.8% year-on-year in May compared to April's 60.9% jump on account of a weak base the same period last year when factories shut due a nationwide lockdown for coronavirus. Auto stocks will be buzzing the today's session reacting to their monthly sales data, amid expectations of sequential improvement. Power stocks will be in focus as the Union Cabinet Committee of Economic Affairs gave its nod to a new scheme for revival of the power distribution sector in India. This is the second reform scheme for power distribution companies (discoms) announced by the BJP government, a year after the ambitious UDAY scheme concluded. There will be some reaction in hospitality industry stocks with ICRA's report that the second wave of the coronavirus pandemic has derailed the recovery of the hospitality industry, which is now expected to return to pre-Covid levels only in 2023-24. Banking stocks will be in limelight as Standard and Poor's (S&P) said Indian banks face systemic risks as the country wades through the aftermath of the Covid-19 second wave. A separate report stated that banks will now have to surrender current accounts of all companies or corporate borrowers, where their loan exposure is less than 10 percent of the total approved facilities.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

15,721.50

15,673.80

15,804.15

BSE Sensex

52,482.71

52,328.92

52,756.20

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Oil & Natural Gas Corporation

190.94

117.70

116.19

120.09

State Bank of India

183.37

419.20

416.70

423.30

Tata Motors

182.77

339.60

337.19

343.69

NTPC

167.39

116.40

115.55

117.85

ITC

159.42

202.70

202.04

203.89

 

  • Reliance Industries has signed strategic partnership with ADNOC to join a new worldscale chlor-alkali, ethylene dichloride and PVC production facility at TA'ZIZ in Ruwais, Abu Dhabi. 
  • Amazon Web Services has inked a multi-year deal with Axis Bank to power the digital transformation programme of the country's third largest private sector bank. 
  • HDFC Life Insurance Company's promoter Standard Life (Mauritius Holdings) has offloaded shares worth over Rs 6,783 crore in the company. 
  • Tata Motors has bagged an order for 15 hydrogen-based fuel cell buses from the Indian Oil Corporation.
News Analysis