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NSE Intra-day chart (25 May 2021)
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Market Commentary 26 May 2021
Benchmarks to make flat-to-negative start amid weak global cues


Indian equity benchmarks erased gains to end Tuesday's volatile session flat dragged by power, energy and banking stocks. Tracking solid global cues, the domestic equity indices opened gap-up and stayed in green for most part of the day. Fall in fresh coronavirus cases in the country aided the sentiments in the markets. India continued to record steady decline in the number of fresh coronavirus cases with the daily toll slipping below the 200,000-mark. India's fresh Covid cases stood at 1.95 lakh. It is the lowest level of cases in the last 41 days. Some optimism also came as the commerce and industry ministry said that foreign direct investment (FDI) equity inflow into the country grew 19 per cent to $59.64 billion during 2020-21 on account of measures taken by the government on the fronts of policy reforms, investment facilitation and ease of doing business. Traders took note of report that a Reserve Bank of India (RBI) study has advocated a mix of fiscal and monetary policies to mitigate economic downturn, saying demand side channel needs to be complemented with a conducive monetary transmission mechanism from the supply side. However, benchmarks erased all the gains to turn negative in late afternoon session after private report cut India's FY22 GDP growth estimate by a sharp 0.80 per cent to 9.2 per cent, saying the economic impact of the second wave of infections has been deeper than initially expected. It also mentioned that the slow pace of vaccinations in the country and the rolling lockdowns across many states for the estimate. Besides, domestic ratings agency ICRA has forecasted a 2 percent Gross domestic product (GDP) growth in the fourth quarter of 2020-21 and a 7.3 percent contraction for the full fiscal year. Traders ignored report that India and Israel are implementing the INDO-ISRAEL Agricultural Project Centres of Excellence and INDO-ISRAEL Villages of Excellence. The work program will aim to grow existing Centres of Excellence, establish new centers, increase CoE's value chain, bring the Centres of Excellence into the self-sufficient mode, and encourage private sector companies and collaboration. Finally, the BSE Sensex fell 14.37 points or 0.03% to 50,637.53, while the CNX Nifty was up by 10.75 points or 0.07% to 15,208.45.


The US markets wiped out earlier gains and finished Tuesday's session lower as the market struggled for a direction. The early strength on markets came amid a continued pullback by treasury yields, with the yield on the benchmark ten-year note falling below 1.6 percent. The drop in yields partly reflects easing worries about inflation and the possibility the Federal Reserve could begin tapering its asset purchases. On the economic data front, the Commerce Department released a report showing a substantial decrease in new home sales in the month of April. The report said new home sales slumped by 5.9 percent to an annual rate of 863,000 in April after jumping by 7.4 percent to a significantly downwardly revised rate of 917,000 in March. Street had expected new home sales to tumble by 7.0 percent to a rate of 950,000 from the 1.021 million originally reported for the previous month. A separate report released by the Conference Board showed consumer confidence in the US held steady in the month of May. The Conference Board said its consumer confidence index edged down to 117.2 in May after climbing to a revised 117.5 in April. Street had expected the consumer confidence index to pull back to 119.5 from the 121.7 originally reported for the previous month. On the secotral front, steel stocks showed a significant move to the downside on the day, dragging the NYSE Arca Steel Index down by 2.4 percent to its lowest closing level in almost a month. Energy stocks also saw considerable weakness even though the price of crude oil for July delivery inched up $0.02 to $66.07 a barrel. Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index tumbled by 2.3 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index both slumped by 2 percent.


Crude oil futures ended marginally higher on Tuesday as traders kept an eye on developments in talks aimed at reviving the Iran nuclear deal. Traders looked to be weighing the likely impact a prospective deal that could result in the US lifting sanctions on Iran might make on global crude supply. Iran and the UN nuclear watchdog said that they are extending a recently expired monitoring agreement by a month, giving negotiators in Vienna time to revive the nuclear deal from which the US withdrew in 2018. Meanwhile, Iranian President Hassan Rouhani said Monday the US has no other option than to lift all sanctions on Iran, which were imposed under former US President Donald Trump. Crude oil futures for July gained $0.02 to settle at $66.07 barrel on the New York Mercantile Exchange. July Brent crude rose $0.19 or 0.3 percent to settle at 68.65 a barrel on London's Intercontinental Exchange.


Snapping previous session's loss, Indian rupee ended substantially stronger on Tuesday on fresh selling of American currency by banks and exporters. Sentiments perked up as commerce and industry ministry stated that foreign direct investment (FDI) equity inflow in India grew by 19 per cent to $59.64 billion during 2020-21 (FY21) as compared to $49.98 billion in 2019-20 on account of measures taken by the government on the fronts of policy reforms, investment facilitation and ease of doing business. On the global front, dollar hit four and half month lows against a basket of peers on Tuesday, as softer-than-expected U.S. data and insistence from Federal Reserve officials that policy would stay pat allayed investor fears about inflation forcing interest rates higher. Finally, the rupee ended 72.77, stronger by 19 paise from its previous close of 72.96 on Monday.


The FIIs as per Tuesday's data were net buyer in equity segment, while net seller in debt segment. In equity segment, the gross buying was of Rs 8252.42 crore against gross selling of Rs 7129.45 crore, while in the debt segment, the gross purchase was of Rs 321.14 crore against gross selling of Rs 442.93 crore. Besides, in the hybrid segment, the gross buying was of Rs 66.51 crore against gross selling of Rs 78.48 crore.


The US markets ended lower on Tuesday and each of Wall Street's main indexes failed to stray far from the unchanged mark following a rally in the prior session as investors continue to try and assess the route of inflation. Asian markets are trading mixed on Wednesday after a recent Wall Street rally stalled overnight stateside. Indian markets ended flat on Tuesday as a rise in IT and FMCG space were capped by a decline in banking and financial stocks. Today, the markets are likely to get flat-to-negative start amid weakness in global peers. Slight rise in coronavirus cases is likely to dampen sentiments in the markets. A day after recording less than 200,000 fresh Covid cases for the first time in 41 days, India's new infections on Wednesday again soared to 208,886. Deaths from the disease rose by 4,172. The country's total cases now stand at 27,156,382, while total fatalities are at 311,421. There will be some cuatiousness as an SBI research report 'Ecowrap' stated that the country's GDP is likely to grow at 1.3 percent in the fourth quarter of 2020-21 and may see a contraction of around 7.3 percent for the full financial year. However, some respite may come later in the day as the government begun assessing the impact of the second wave of infections on different sectors and may look at providing support at an appropriate time to segments requiring fiscal help, with the world's worst outbreak of COVID pandemic stalling a nascent economic recovery. Some support may come as industry chamber CII said healthy flow of FDI into the country corroborates India's status as a preferred investment destination among global investors. Traders may take note of report that Reserve Bank of India (RBI) Governor Shaktikanta Das told chiefs of select private banks to boost credit flows to retail and business borrowers. He also called on them to implement the measures announced by the central bank on May 5. Meanwhile, the Goods and Services Tax (GST) Council will meet on May 28 to take up recommendations related to fighting the coronavirus pandemic. The COVID-related discussions are likely to be in terms of the tax rates for vaccines, drugs and pharmaceuticals. Auto stocks will be in focus as India Ratings and Research (Ind-Ra) said the second wave of the Covid-19 pandemic has interrupted the sales momentum recorded by the automobile industry in 3Q-4Q FY21. Accordingly, many original equipment manufacturers (OEMs) have advanced maintenance shutdowns to April and May on account of dampening consumer sentiments, closure of automotive dealerships, as well as supply-side constraints. There will be some reaction in agriculture related industry stocks as the agriculture ministry said India's foodgrain production is estimated to rise 2.66 per cent to a new record of 305.43 million tonnes in the current crop year 2020-21, on better output of rice, wheat and pulses amid good monsoon rains last year.


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