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NSE Intra-day chart (16 August 2023)
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Market Commentary 17 August 2023
Benchmarks likely to start on bearish note on weak global cues


Indian equity benchmarks recovered the day's losses and ended the day positively for the second consecutive session on Wednesday, led by gains in Utilities, Realty and Power sectors. Amid weak global cues, the markets started on a negative note. Higher-than-expected India's Consumer Price Index (CPI) inflation print and trade deficit figures dented market sentiments. Retail inflation spiked to a 15-month high of 7.44 per cent in July much higher than 4.87 per cent in June as tomatoes, vegetables and other food items turned costlier, overshooting Reserve Bank's comfort level for the first time in the current fiscal. India's trade deficit, which shows the difference between imports and exports, rose to $20.67 billion in July as compared to $20.13 billion in June. Some pessimism also came as the commerce ministry in its latest data showed that India's merchandise exports contracted by 15.88 per cent, the sixth month in a row, to $32.25 billion in July 2023 as compared to $38.34 billion in July 2022 due to a global slowdown and fall in shipments of key sectors like petroleum, gems and jewellery. After the initial down-tick, markets inched gradually higher as the day progressed and pared all the losses to close in green. Traders found support with a report by SBI Research showing that the per capita income of Indians as gleaned from income tax filing is expected to increase from Rs 2 lakh in FY23 to Rs 14.9 lakh in FY47, coinciding with 100 years of the country's Independence. Some support also came after a private report stated that India and the United Arab Emirates have started settling bilateral trade in their local currencies with India's top refiner making payment in rupees for purchase of a million barrels of oil from the Middle Eastern nation. India in July signed an agreement with the UAE allowing it to settle trade in rupees instead of dollars, boosting India's efforts to cut transaction costs by eliminating dollar conversions. Finally, the BSE Sensex rose 137.50 points or 0.21% to 65,539.42 and the CNX Nifty was up by 30.45 points or 0.16% to 19,465.00.


The US markets ended lower on Wednesday, with Nasdaq settling cut of over one percent, amid indications the Federal Reserve will continue to hold interest rates higher for longer to contain inflation. Further, prospect of a possible downgrade of several U.S. lenders by Fitch Ratings weighed as well. Meanwhile, the minutes from the Federal Reserve's meeting on July 25 & 26 released that showed most of the central bank officials continued to see significant upside risks to inflation, which could require further tightening of monetary policy. The minutes also showed that a few participants were hesitant to embrace further hikes, on concerns that the tightening in financial conditions since the beginning of last year could prove more substantial than anticipated. The central bank lifted its benchmark rate to a range of 5.25 to 5.5 percent last month, the highest level in 22 years. On the economic data front, a report from the Commerce Department showed new residential construction in the U.S. saw a substantial rebound in the month of July. The Commerce Department said housing starts surged 3.9 percent to an annual rate of 1.452 million in July after plunging by 11.7 percent to a revised rate of 1.398 million in June. Street had expected housing starts to increase to a rate of 1.448 million from the 1.434 million originally reported for the previous month. Meanwhile, the report said building permits inched up by 0.1 percent to an annual rate of 1.442 million after tumbling by 3.7 percent to a revised rate of 1.441 million in June. Building permits, an indicator of future housing demand, were expected to climb to a rate of 1.463 million from the 1.440 million originally reported for the previous month.


Crude oil futures ended lower on Wednesday, magnifying previous session's losses, amid worries about the outlook for energy demand from China. Further, oil prices were also weighed down by uncertainty over the future course of interest rates and the prospect of a possible downgrade of several U.S. lenders by Fitch Ratings. Besides, oil prices rose despite data released by the Energy Information Administration (EIA) showed crude stockpiles fell by 5.960 million barrels in the week ended August 11, as against expectations for a decline of about 2.3 million barrels. Meanwhile, distillate stockpiles were up 0.296 million barrels last week, as against forecast for a drw of 0.473 million barrels. Benchmark crude oil futures for September delivery fell $1.61 or about 2 percent to settle at $79.38 a barrel on the New York Mercantile Exchange. Brent crude for October delivery dropped $1.04 or1.23 percent to settle at $83.45 a barrel on London's Intercontinental Exchange.


The Indian forex and money markets remained shut on Wednesday for Parsi New Year.


The FIIs as per Monday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 9665.47 crore against gross selling of Rs 12200.08 crore, while in the debt segment, the gross purchase was of Rs 1588.48 crore with gross sales of Rs 326.59 crore. Besides, in the hybrid segment, the gross buying was of Rs 18.32 crore against gross selling of Rs 6.69 crore.


The US markets ended lower on Wednesday after Fed minutes revealed that most officials see an elevated inflation risk. Asian markets are trading in red on Thursday following overnight losses on Wall Street. Indian markets settled in green terrain on Wednesday as strength in the IT, auto, and select financial and pharma stocks helped erase initial losses. Today, markets are likely to start session on a bearish note tracking broadly negative cues from global peers amid signs of economic stress in China and uncertainty about the outlook for U.S. interest rates. There will be some cautiousness as global rating agency Fitch warned that rapid loan growth, especially in unsecured retail credit, needs careful management to avoid a spike in risks and credit costs for banks and finance companies. Some worries will come as Crisil Market Intelligence and Analytics said that urban poor have been the most impacted by 15-month high consumer price inflation (CPI) in July.  It noted that the poorest segment in both urban and rural areas faced a higher inflation burden than their high-income counterparts, as food inflation accelerated sharply. Traders may take note of Care Ratings' report that banks' lending to non-banking finance companies (NBFCs) rose by 35.1 per cent to Rs 14.2 lakh crore in June. Credit exposure of banks to NBFCs rose by a robust 35.1 per cent on-year to Rs 14.2 lakh crore in June, indicating non-banking finance firms' decreased reliance on international borrowings. There will be some buzz in hospital industry stocks as ICRA anticipates the revenues for the hospital industry to grow by 8-10 per cent in FY24, due to a rise in lifestyle diseases, increased awareness, and penetration of health insurance. Banking stocks will be in focus as Fitch Ratings said the operating environment for Indian banks has strengthened as economic risks associated with the Covid-19 pandemic have ebbed. There will be some reaction in rubber industry stocks as the All India Rubber Industry Association expects 5% higher production of natural rubber in 2023-24, from 8 lakh metric tonne in the previous fiscal. Rail related stocks will be in limelight as in a major boost for railway infrastructure, the Cabinet Committee on Economic Affairs approved seven multi-tracking projects at an estimated cost of Rs 32,500 crore, under the PM Gati Shakti National Master Plan. There will be some reaction in telecom related stocks as ICRA said the telecom services industry is expected to post moderate revenue growth of 7-9 per cent in FY 24, due to muted average revenue per user (ARPU) expansion in the absence of tariff hikes in the near-term. Shares of electric bus manufacturers like Eicher Motors, Ashok Leyland and Olectra Greentech are likely to be in focus as the union cabinet approved PM-eBus Sewa project for providing 10,000 e-bus across cities.


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