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NSE Intra-day chart (03 February 2021)
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Market Commentary 04 February 2021
Benchmarks to make cautious start amid mixed global cues


Extending their winning streak to a third consecutive session, Indian equity benchmarks ended at record closing high with gains of around a percent each on Wednesday, as economic recovery hopes, on the back of growth-driven Budget, positive global cues, and healthy FII buying continued to please investors. Markets made cautious start but soon gained traction and traded in fine fettle, as traders took some encouragement with NITI Aayog Vice-Chairman Rajiv Kumar's statement that the reform measures announced in the budget 2021-22 are aimed at taking India out of the COVID-19-induced downturn and making the country a better destination for private investment, both for domestic and foreign investors. Sentiments remained up-beat as the US-India Strategic and Partnership Forum (USISPF) described Union Budget as bold and visionary, which would launch India's economy into a growth trajectory. It added that the budget positions India towards its target of a $5 trillion economy. Markets were continuing their rally mood in the afternoon session, as India's services sector expanded for the fourth consecutive month in January as business activities quickened and rising business optimism is set to sustain the growth momentum. The seasonally-adjusted India Services Business Activity Index rose from 52.3 in December to 52.8 in January, pointing to a quicker expansion in output. The index was above the critical 50 mark that separates growth from contraction for the fourth month in a row during January. Additional support also came with trade Promotion Council of India's (TPCI's) Founder Chairman Mohit Singla's statement that the country's exports, which have recorded a growth of 5.4 percent in January, reflects the trade has been on the path of quick recovery. He said the exports have also recorded positive growth in December 2020 and it is a reflection that Indian products have been sustaining its global demand despite challenges. Finally, the BSE Sensex rose 458.03 points or 0.92% to 50,255.75, while the CNX Nifty was up by 142.10 points or 0.97% to 14,789.95.


The US markets ended mostly higher on Wednesday, after moving sharply higher over the course of the two previous sessions. A positive reaction to the latest earnings news contributed to initial strength on markets, with Google parent Alphabet helping to lead the way higher. Shares of Alphabet surged up by 7.3 percent after the tech giant reported fourth quarter results that exceeded street estimate on both the top and bottom lines. On the other hand, online retail giant Amazon turned lower over the course of the session despite reporting better than expected fourth quarter results. Amazon also announced CEO Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021, with Amazon Web Services chief Andy Jassy set to become CEO at that time. A notable decline by shares of Amgen weighed on the Dow after the biotechnology company reported fourth quarter results that beat estimates but provided disappointing guidance. On the economic data front, payroll processor ADP released a report showing a much stronger than expected rebound in private sector employment in the month of January. ADP said private sector employment jumped by 174,000 jobs in January after decreasing by a revised 78,000 jobs in December. Street had expected employment to rise by 49,000 jobs compared to the loss of 123,000 jobs originally reported for the previous month. A separate report released by the Institute for Supply Management (ISM) showed US service sector activity unexpectedly grew at an accelerated rate in the month of January. The ISM said its services PMI inched up to 58.7 in January from a revised 57.7 in December, with a reading above 50 indicating growth in the service sector. The uptick came as surprise to participants, who had expected the index to edge down to 56.8 from the 57.2 originally reported for the previous month.


Crude oil futures ended higher on Wednesday, extending their previous sessions' gains, lifted by the Organization of the Petroleum Exporting Countries and their allies' decision to cut crude production for two months. Optimism about additional fiscal stimulus in the US, and fairly encouraging momentum in vaccination drive eased concerns about outlook for energy demand. However, Data showing a smaller than expected decline in US crude inventories last week limited oil's uptick. Data from Energy Information Administration (EIA) showed crude inventories dropped by 994.000 barrels last week. Crude oil futures for March rose $0.93 or 1.7 percent to settle at $55.69 barrel on the New York Mercantile Exchange. April Brent crude gained $0.61 or 1.04 percent to settle at $58.41 a barrel on London's Intercontinental Exchange.


Indian rupee ended slightly higher against dollar on Wednesday, on selling of the American currency by exporters. Traders took some support as India's services sector expanded for the fourth consecutive month in January as business activities quickened and rising business optimism is set to sustain the growth momentum. The seasonally-adjusted India Services Business Activity Index rose from 52.3 in December to 52.8 in January, pointing to a quicker expansion in output. Adding optimism, signaling a recovery, merchandise exports in January 5.4% from a year before, the highest since September 2020 and compared with a 0.1% rise in December. Imports, too, recorded a second successive month of growth, though the pace of expansion slowed from the January level, reflecting the fragile state of domestic demand. On the global front; euro traded near a 2-month low against the dollar on Wednesday, as investors looked to a widening disparity between the strength of U.S. and European pandemic recoveries. Finally, the rupee ended at 72.95, 1 paise stronger from its previous close of 72.96 on Tuesday.


The FIIs as per Wednesday's data were net buyer in equity segment, while net seller in debt segment. In equity segment, the gross buying was of Rs 13903.15 crore against gross selling of Rs 7093.92 crore, while in the debt segment, the gross purchase was of Rs 446.21 crore with gross sales of Rs 645.33 crore. Besides, in the hybrid segment, the gross buying was of Rs 14.38 crore against gross selling of Rs 16.20 crore.


The US markets ended mostly higher on Wednesday after two days of sharp gains while Alphabet Inc's shares headed for their best day in nine months following its strong quarterly results. Asian markets are trading mostly in red on Thursday as a mixed Wall Street session gave investors few immediate reasons to increase their risk positions following the recent social media-driven trading chaos. Indian markets ended at record close on Wednesday, extending gains for the third straight session led by gains in banking, metal and pharma indices. Today, the markets are likely to make cautious start amid mixed global cues. Investors will be looking ahead to the Reserve Bank of India's (RBI's) monetary policy meeting outcome on Friday. The Monetary Policy Committee (MPC) of the Reserve Bank is widely expected to keep repo rates on hold at 4 percent. Traders will be concerned as India recorded 12,703 fresh Covid-19 cases of the coronavirus disease (Covid-19). The total number of active cases in the country has fallen to 156,952, while the caseload tally stands at 10,790,909. Globally, nearly 104.9 million people have been infected by the virus. The country continues to be second-most-affected globally, and ranks 18th among worst-hit nations by active cases. There will be some cautiousness with rating agency Moody's statement that India's fiscal deficit projections are higher than expected and slower consolidation will constrain its fiscal strength over the medium term. It also expects India's nominal GDP growth to rise to closer to 17 percent in fiscal 2021, higher than 14.4 percent projected in the Budget. Traders may take note of Commerce secretary Anup Wadhawan's statement that negotiations over the India-US mini trade deal are ongoing and contentious issues have largely been addressed. Besides, the Finance Ministry has released the 14th installment of Rs 6,000 crore to states to meet the GST compensation shortfall, taking the total amount of fund released so far to Rs 84,000 crore. Till now, 76 per cent of the total estimated GST compensation shortfall has been released to states and 3 UTs. Out of this, an amount of Rs 76,616.16 crore has been released to 23 states and Rs 7,383.84 crore to the 3 UTs with Legislative Assembly (Delhi, J&K, Puducherry). There will be some reaction in aviation stocks as global airlines body IATA said passenger traffic at airports in tier 2 and 3 cities of the country is higher than pre-COVID levels. Power stocks will be in focus amid report that the Ministry of Power will launch a domestic manufacturing programme for critical power and renewable energy equipment at an outlay of Rs 1,500 crore in the coming financial year.


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



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