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Market Commentary 18 June 2021
Markets likely to get positive start amid mixed global cues


Indian equity benchmarks declined for second straight session on Thursday mirroring losses in global markets after the US Federal Reserve hinted that it may raise interest rates at a much faster pace than assumed. Equity indices started session deep in the red, as traders were concerned as India reported 62,224 new Covid-19 cases on Wednesday, taking the total to 29,633,105. The death count climbed to 3,79,573 with 2,542 fresh fatalities. Sentiments remained downbeat with a RBI article stating that bank deposits and currency holding with the public have been adversely impacted during the second COVID wave, indicating a heavy outgo towards pandemic-induced medical expenditure. Sentiments were also fragile as foreign institutional investors (FIIs) stood as net sellers in the capital market as they offloaded shares worth Rs 870.29 crore on June 16, as per provisional exchange data. Markets magnified their losses in late afternoon session as anxiety came as the Reserve Bank of India (RBI) in its State of the Economy report June bulletin has said that it sees reasons to be cautiously optimistic as the second wave of the pandemic seems to have hit domestic demand, while other economic indicators show the economy is coming back on stream. Traders also took a note of the commerce ministry said that sellers who do not declare local content percentage while uploading their products at public procurement portal GeM will lose out on business and will not be able to participate in bids in which buyer has chosen to procure only made-in-India items. However, key indices were eventually able to claw back some of their losses by the close, as traders found some solace with Confederation of Indian Industry (CII) stating that the country's gross domestic product (GDP) is expected to grow at 9.5 per cent in the current financial year (FY 2021-22). This will take the GDP to a level that is slightly higher than in FY20. The strong growth in the second-half will be supported by robust external demand and large scale coverage of vaccination allowing resumption of economic activity. Finally, the BSE Sensex fell 178.65 points or 0.34% to 52,323.33, while the CNX Nifty was down by 76.15 points or 0.48% to 15,691.40.


The US markets ended mostly lower on Thursday following the broad-based weakness seen in the previous session. The closely-watched Federal Reserve meeting Wednesday spurred a sell-off in equities after the central bank moved up its timeline for rate hikes, seeing two increases in 2023. The central bank also hiked its inflation forecast to 3.4% for the year, a percentage point higher than the Federal Open Market Committee's forecast in March. Adding to the bearish sentiment, the Labor Department released a report showing an unexpected uptick in initial jobless claims in the week ended June 12th. The report said initial jobless claims rose to 412,000, an increase of 37,000 from the previous week's revised level of 375,000. The increase surprised participants, who had expected jobless claims to edge down to 359,000 from the 376,000 originally reported for the previous week. Jobless claims had declined in eight out of the nine previous weeks, falling to their lowest levels since March of 2020. However, suggesting strong economic growth will continue in the near term, the Conference Board released a report showing another significant increase by its index of leading US economic indicators. The Conference Board said its leading economic index surged up by 1.3 percent in May, matching the revised jump in April as well as Street estimates. The matching increases follow a 1.4 percent spike in March.


Crude oil futures ended lower on Thursday weighed down by a stronger dollar. The US dollar strengthened against a basket of other currencies after the Federal Reserve signalled it might raise interest rates at a much faster pace than assumed. A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand. Crude oil futures for July fell $1.11 or 1.5 percent to settle at $71.04 barrel on the New York Mercantile Exchange. August Brent crude dropped $1.23 or 1.65 percent to settle at $73.16 a barrel on London's Intercontinental Exchange.


Indian rupee ended substantially lower against the US dollar on Thursday as US' Federal Reserve officials held interest rates near zero but signaled they expect two increases by the end of 2023, pulling forward the date of liftoff as the economy recovers. Traders were also worried RBI's article stating that bank deposits and currency holding with the public have been adversely impacted during the second COVID wave, indicating a heavy outgo towards pandemic-induced medical expenditure. On the global front, dollar extended gains on Thursday after the U.S. Federal Reserve surprised markets by signalling it would raise interest rates and end emergency bond-buying sooner than expected. Finally, the rupee ended 74.08, weaker by 76 paise from its previous close of 73.32 on Wednesday.


The FIIs as per Thursday's data were net seller in equity segment, while net buyer in debt segment. In equity segment, the gross buying was of Rs 5927.94 crore against gross selling of Rs 6814.20 crore, while in the debt segment, the gross purchase was of Rs 782.42 crore with gross sales of Rs 661.13 crore. Besides, in the hybrid segment, the gross buying was of Rs 3.75 crore against gross selling of Rs 13.29 crore.


The US markets ended mostly lower on Thursday as investors continued to interpret new guidance from the Federal Reserve, which is now looking at potentially raising interest rates as soon as 2023. Asian markets are trading mixed on Friday following an overnight drop for the Dow Jones Industrial Average on Wall Street. Indian markets ended lower on Thursday, weighed by banks and financials after the US Federal Reserve pulled up the rate hike timeline to 2023 from 2024 earlier citing rising inflation. Today, markets are likely to make positive start after two days of losses amid mixed global cues. Inflation worries likely to ease somewhat as oil prices fell from multi-year highs on demand worries after new coronavirus cases jumped in Britain. Some support will come as the Confederation of Indian Industry (CII) urged the government to provide a fiscal stimulus worth Rs 3 trillion along with direct cash transfers to perk up domestic demand. The industry body also sought expansion in the Reserve Bank of India (RBI) balance sheet to meet the demand exigencies of the pandemic. Meanwhile, India maintained 43rd rank on an annual World Competitiveness Index compiled by the Institute for Management Development (IMD) that examined the impact of COVID-19 on economies around the world this year. However, traders may be concerned with a private report that lockdowns in April and May to contain Covid-19 have likely led to India's economy contracting 12 per cent in the June quarter as against 23.9 per cent contraction in the same quarter in 2020. Besides, an assessment made by the Reserve Bank revealed that the devastating second wave of the coronavirus pandemic in April-May is estimated to have cost the nation Rs 2 lakh crore in terms of output. There will be some cautiousness as India reported 67,208 new Covid-19 infections over the past 24 hours, data from the health ministry showed. The country's total case load now stood at 29.70 million, while total fatalities are at 381,903, the data showed. Coronavirus-related deaths rose by 2,330 overnight. Traders may take note of Fitch Ratings' statement that global inflation trends and associated risks around interest rates and exchange rates may have direct sovereign credit implications, and added that a critical question for government debt sustainability is how inflation will affect debt/GDP ratios. There will be some reaction in Information and broadcasting industry stocks as the Centre amended the Cable Television Network Rules to provide for a three-layer statutory mechanism for the redressal of complaints relating to content broadcast by television channels. Auto stocks will be in focus with a private report stating that India's automotive industry sold 5.35 lakh units in retail sales in May, a sharp 55 percent decline compared to April this year and a 71 percent decline compared to May 2019.


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  • Wipro has entered into a partnership with Exaware, a leading provider of Open Network routing solutions. 
  • IndusInd Bank has launched IndusEasyCredit, a comprehensive digital lending platform that enables customers to meet their financial requirements from the comfort of their homes.
  • Reliance Industries' telecom arm -- Reliance Jio Infocomm has started 5G field trial network using its own indigenously developed equipment and technology in Mumbai.
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