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Domestic Market View
Benchmarks likely to make positive start
Indian equity markets extended their losses for third straight session on Thursday, amid weakness in other Asian markets coupled with depreciation in rupee. Investors also remained cautious ahead of the outcome of key assembly elections. Today, the markets are likely to make optimistic start, tracking positive trend in Asian peers after the speculation that the Federal Reserve might be one-and-done with US rate hikes. Also, traders will be looking ahead of five states elections exit poll due on December 07 evening and result on December 11.
Traders will be getting some encouragement with the Union Cabinet approving an agriculture export policy with an aim to double the shipments to $60 billion by 2022. The policy would focus on all aspects of agricultural exports including modernising infrastructure, standardisation of products, streamlining regulations, curtailing knee-jerk decisions, and focusing on research and development activities. Traders also will be getting some support with the Reserve Bank of India’s (RBI) deputy governor Viral Acharya’s statement that the RBI will continue to inject liquidity into the banking system through open market operation (OMO) purchases till the end of this fiscal. In the current financial year, the central bank has conducted OMO purchases to the tune of Rs 1.36 trillion, with over Rs 1 trillion of the infusion in the last three months.
Meanwhile, a private report indicated that the investment of $100 billion in the Indian telecom industry as envisioned in the National Digital Communications Policy 2018 (NDCP) would result in an increase of $1.21 trillion in India’s Gross Domestic Product (GDP) on a cumulative basis. There will be some buzz in the textile sector stocks with report that India’s annual cotton output could drop 12% to the lowest in nine years as limited rainfall in the top two producing states has slashed crop yields, potentially cutting exports from the world’s top producer.
Domestic Market Overview.
Sea of red takes over Dalal Street on Thursday
A sea of red took over Dalal Street on Thursday, as bears tighten their grip amid selloff in majority of sectors along with weak cues from global markets. Both the larger peers ended lower with the losses of more than 1.50%. After a sluggish start, the markets remained under pressure throughout the day, as Fitch Ratings revised downwards India’s GDP growth forecast to 7.2% for current fiscal citing higher financing cost and reduced credit availability. In its Global Economic Outlook, Fitch also projected that for 2019-20 and 2020-21 financial years, India’s GDP growth will be 7% and 7.1% respectively. The rating agency has also forecasted Indian rupee to weaken to 75 to a dollar by end of 2019. Adding more anxiety among the traders, Fitch Solutions said that the slow pace of land reforms will continue to result in project delays and rising costs, posing a downside risk for the road and rail sectors. Some concerns also came with a private report stating that officers of the indirect tax department have started issuing preliminary notices to captive units of multinationals and Indian companies exporting offshore support services.
The street paid no heed towards Finance Minister Arun Jaitley’s statement that India, among the world's fastest growing emerging economies, is likely to maintain the high growth rate of 7-8% over the next decade. He emphasized that landmark reforms such as the Insolvency and Bankruptcy Code offer an attractive and conducive environment to foreign investors to the country. The markets participants also overlooked the finance ministry’s statement that the assessment of growth and inflation made by the Reserve bank of India’s (RBI) Monetary Policy Committee (MPC) is in line with government's reading. Traders took note of RBI governor Urjit Patel’s statement that if the upside risks to inflation do not materialise, the bank may change its monetary policy accordingly, raising prospects of rate cuts. Meanwhile, Economic Affairs Secretary Subhash Chandra Garg said the calibrated tightening stance of RBI’s MPC probably needed a rethink even as he welcomed the decision on policy rate.
Banking stocks ended lower, after the RBI said it would link retail loans to external benchmarks replacing MCLR. Port sector stocks also edged lower, despite report that rating agency ICRA maintained stable year-end outlook for the port sector, terming rebound in coal volumes and steady progress on the Sagarmala project positive for Indian port sector players in the medium term. Further, Non-banking finance companies’ (NBFCs) stocks fell, with Crisil’s report that difficulties in getting funding will halve the non-bank lenders’ asset growth to around 10% in the second half of the current fiscal. It added that the asset quality of retail loans is resilient, but the NBFCs’ non-retail book has to be monitored for potential stress. Besides, shares related to agri industry were in limelight, amid reports that the Union Cabinet is expected to approve a policy to boost exports of agriculture commodities such as tea, coffee and rice and increase the country's share in global agri trade.
Global Market Overview
Asian markets end in red as trade tensions escalate
Asian markets ended in red on Thursday as the arrest of a senior Huawei executive over potential violation of US sanctions on Iran raised more questions about the Trump administration's overall China strategy. The recent drop in US 10-year Treasury yields, Brexit-related uncertainty and caution ahead of a crucial meeting of the Organization of Petroleum Exporting Countries also weighed on markets. Japanese shares closed lower, with chip-related stocks coming under heavy selling pressure. Meanwhile, Tech stocks paced the declines on concerns that they might be hurt seriously in view of security concerns over the Chinese telecoms group Huawei. On economic front, Bank of Japan Governor Haruhiko Kuroda told parliament that economic risks from abroad could be severe and the central bank would respond appropriately as needed. Seoul stocks ended sharply lower on skepticism about the U.S.-China trade deal.
US markets end mostly lower on Thursday
The US markets ended mostly lower on Thursday after a dramatic session that saw the Dow Jones Industrial Average drop more than 700 points at one point on fears that the arrest of a Huawei executive would reignite trade worries. Huawei CFO Meng Wanzhou was arrested in Canada on suspicion of violating US trade sanctions against Iran and faces possible extradition to the US. Further, some cautiousness also prevailed in the markets after a report released by the Commerce Department showed a steep drop in new orders for US manufactured goods in the month of October. The Commerce Department said factory orders tumbled by 2.1% in October after rising by a downwardly revised 0.2% in September. Street had expected factory orders to slump by 2.0% compared to the 0.7% increase originally reported for the previous month.
However, the markets clawed back most of its losses on a report that the Federal Reserve may turn more accommodative. Federal Reserve officials are considering signaling a wait-and-see mentality after a likely interest rate hike later this month. According to a report released by the Institute for Supply Management, growth in US service sector activity unexpectedly accelerated in the month of November. The ISM said its non-manufacturing index crept up to 60.7 in November after pulling back to 60.3 in October, with a reading above 50 indicating service sector growth. Street had expected the index to dip to 59.2. Meanwhile, revised data released by the Labor Department showed labor productivity in the US increased by slightly more than initially estimated in the third quarter. The report also said unit labor costs rebounded by less than previously estimated. The report said productivity surged up by 2.3% in the third quarter compared to the previously reported 2.2% spike. The upward revision to the pace of productivity growth matched street estimates.
Dow Jones Industrial Average declined 79.40 points or 0.32 percent to 24947.67 and S&P 500 lost 4.11points or 0.15 percent to 2695.95, while Nasdaq was up by 29.83 points or 0.42 percent to 7188.26.
Index closed a day at 10601 with huge loss of 182 points on Thursday session and formed a bearish candle on daily chart. Index has given small rising trend line breakdown on daily chart suggesting some weakness, now index has immediate resistance near 10655-10700 zone if index managed to sustain above 10700 zone then we may see upside to be continue and support for index is coming near 10570-10530. Nifty bank has support 26100-26000 and resistance is near 26350-26450 zone.
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