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Market Commentary 21 January 2022
Markets to make gap-down opening amid global sell-off

 

Indian equity benchmarks ended the session on a negative note for the third consecutive session on Thursday amid downbeat global sentiment and heightened fears in anticipation of interest rate hikes by the US Federal Reserve. Markets started the session in red as traders got anxious with rating agency Icra's statement that while there is some evidence of the economic recovery becoming broad-based in the third quarter of fiscal 2022, it is yet to attain the durability being sought by the Monetary Policy Committee (MPC) as a precursor to policy transmission. The agency expects the real GDP to expand 6-6.5 per cent year-on-year in the third quarter of FY2022 (+8.4 per cent in Q2 FY2022. Some cautiousness also came with the UN Conference on Trade and Development (UNCTAD) in its latest report stated that Foreign Direct Investment (FDI) flows to India in 2021 were 26 percent lower, mainly because large M&A deals recorded in 2020 were not repeated. It also said that the second wave of the COVID-19 outbreak in India weighed heavily on the country's overall economic activities. Key indices extended fall in afternoon deals, even as India Ratings & Research expects India's real gross domestic product to grow 7.6 per cent in fiscal year 2022-23, helped partly by a continued government spending and favourable global trade outlook. However, a rebound in the final hour trimmed some losses as some support came with the Reserve Bank of India's (RBI) digital payments index (DPI), which was launched in January 2021 to indicate the extent of digitisation of payments across the country, shows that the index for September 2021 stood at 304.06 against 270.59 in March. This indicates the rapid adoption and deepening of digital payments across the country. Traders took note of report that India will push for a waiver of certain provisions of the global intellectual property rights agreement for Covid-19 medicines and products at a mini ministerial meeting called by the World Trade Organization to firm up its pandemic response. Finally, the BSE Sensex fell 634.20 points or 1.06% to 59,464.62 and the CNX Nifty was down by 181.40 points or 1.01% to 17,757.00.

 

The US markets ended lower on Thursday, giving up their sharp gains from earlier in the session, as markets continues to struggle this year in a rising interest rate environment. Stocks moved lower as government bond yields remained elevated, part of a market repricing as the Federal Reserve gets set to tighten monetary policy. The central bank meets next week, with markets indicating just a slight chance of action on interest rates. However, traders have fully priced in the first of what is expected to be four 0.25 percentage point hikes through 2022. The two-year Treasury, which is most closely tied to Fed rate policy, most recently yielded about 1.04%, while the benchmark 10-year note touched a high of 1.87%. Meanwhile, several earnings reports moved stocks on Thursday. Dow component Travelers posted beats on the top and bottom lines while American Airlines also beat street's estimates but lowered guidance. Travelers rose 3.2%, while American Airlines fell 3.2%. United Airlines shares fell 3.4% after the company reported its quarterly results and warned that omicron has dented bookings and will delay its pandemic recovery. On the economic data front, Unemployment data signaled the surge in omicron could be hurting the recovery. Jobless claims for the week ended January 15 totaled 286,000 for the week, their highest level since October.

 

Crude oil futures ended lower on Thursday as investors took profits after a recent price rally, and industry data showed US crude and gasoline stocks rose last week. Crude stocks rose by 1.4 million barrels for the week ended January 14 while gasoline inventories rose by 3.5 million barrels, according to the American Petroleum Institute. However, distillate stocks fell by 1.2 million barrels, after last week's 3.035 million barrel increase. Benchmark crude oil futures for February delivery fell $0.67 or 0.77 percent to settle at $86.29 a barrel on the New York Mercantile Exchange. Brent crude for March delivery lost $0.06 or to settle at $88.38 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker against the US dollar on Thursday amid heightened fears in anticipation of interest rate hikes by the US Federal Reserve. Traders also got anxious with rating agency Icra's statement that while there is some evidence of the economic recovery becoming broad-based in the third quarter of fiscal 2022, it is yet to attain the durability being sought by the Monetary Policy Committee (MPC) as a precursor to policy transmission. The agency expects the real GDP to expand 6-6.5 per cent year-on-year in the third quarter of FY2022 (+8.4 per cent in Q2 FY2022. Some cautiousness also came with the UNCTAD in its latest report stated that FDI flows to India in 2021 were 26 percent lower, mainly because large M&A deals recorded in 2020 were not repeated. On the global front, Sterling held close to a 23-month high against the euro and rose versus a weakening dollar on Thursday, still supported by expectations of UK interest rate rises. Finally, the rupee ended 74.51 (Provisional), weaker by 7 paise from its previous close of 74.44 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in equity segment, while net buyers in debt segment. In equity segment, the gross buying was of Rs 7635.40 crore against gross selling of Rs 10273.89 crore, while in the debt segment, the gross purchase was of Rs 578.04 crore with gross sales of Rs 414.72 crore. Besides, in the hybrid segment, the gross buying was of Rs 22.01 crore against gross selling of Rs 26.28 crore.

 

The US markets ended lower on Thursday amid fears of a tighter monetary policy. Asian markets are trading in red on Friday tracking overnight losses on Wall Street, amid concerns about an earlier-than-expected tightening of monetary policy and the pace of economic recovery in the US due to the Omicron variant of COVID-19. Indian markets finished a choppy session sharply lower on Thursday, extending losses to a third straight day, dragged by IT, financial and oil & gas stocks. Today, the markets are likely to make gap-down opening amid weak global cues and persistent selling by FIIs. There will be some cautiousness as the government data showed that retail inflation for farm and rural workers rose to 4.78 percent and 5.03 percent respectively in December 2021, mainly due to higher price of certain food items. However, some respite may come later in the day as India Ratings and Research said the country's economy is likely to grow at 7.6 per cent year-on-year in 2022-23. The agency said after a gap of two years, the Indian economy will show a meaningful expansion, as the real GDP in 2022-23 is expected to be 9.1 per cent higher than that in 2019-20 (pre-COVID level). Some support may come as the payroll data of the Employees' Provident Fund Organization (EPFO) showed at least 8,27, 979 people joined formal work for the first time in November, showing a marginal uptick in the formal sector job creation over the month-ago period. Meanwhile, in a bid to spur capital expenditure, the Finance Ministry has relaxed spending norms for the fourth quarter with a view to boost economic activities slowed down due to the impact of COVID-19. NBFCs stocks will be in focus as domestic rating agency Icra Ratings revised the asset under management (AUM) growth outlook of retail non-banking financial companies (NBFCs) to 5-7 per cent for the fiscal 2022 from an earlier expectation of 8-10 per cent.  There will be some reaction in mines and mineral industry stocks as the mines ministry said India's mineral production rose five per cent in November 2021 compared to the year-ago period. The index of mineral production of mining and quarrying sector for November 2021 stood at 111.9, which was five per cent higher compared to the level in November 2020. Today is also the last day to subscribe to AGS Transact Technologies IPO, which has been subscribed 1.42 times so far. Investors awaited more of quarterly earnings from India Inc for cues. Reliance Industries is due to report its financial results later in the day.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

17,757.00

17,622.40

17,917.65

BSE Sensex

59,464.62

59,006.80

59,983.97

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Power Grid Corporation of India

226.27

204.65

201.59

211.54

Tata Motors

183.64

520.85

514.16

525.36

State Bank of India

177.24

515.80

509.49

520.64

Coal India

174.62

163.90

274.89

286.04

ITC

173.29

220.35

218.19

222.34

 

  • Bajaj Finserv has reported fall of 2.65% in its consolidated net profit at Rs 1255.79 crore for Q3FY22 as compared to Rs 1289.96 crore for Q3FY21. 
  • UPL and other shareholders in Sinagro Produtos Agropecuarios SA., Brazil have signed an agreement with Bunge to sell 33% stake in Sinagro. 
  • Asian Paints has reported a fall of 18.49% in its consolidated net profit at Rs 1031.29 crore for Q3FY22 as compared to Rs 1265.35 crore for Q3FY21. 
  • HCL Technologies has expanded its strategic transformation partnership with ams OSRAM to digitize one of the optical solutions leader's key business processes.
News Analysis