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Market Commentary 06 January 2021
Benchmarks to make cautious start amid mixed Asian cues

 

Indian equity benchmarks once again settled at record closing highs on Tuesday, led by strong buying in Banking, Finance and IT stocks. The benchmarks staged a gap down opening, mirroring losses in other Asian markets. Sentiments remained down-beat with report that under the Trump administration, US-India tensions have increased over each side's tariff policies. It also noted that the two sides have also held concerted negotiations to address these trade frictions. Some concern also came amid reports that India's tax pie seems to have undergone a subtle change with a sharp drop in direct tax collections resulting from a disproportionate impact of the COVID-19 carnage on incomes. Market participants also took a note of Union Health and Family Welfare Minister Dr Harsh Vardhan's statement that the coronavirus pandemic has turned the clock back by many years and the lockdowns have raised insurmountable barriers and imposed many roadblocks. However, late hour buying helped benchmarks recover from intraday lows and settled higher. Some optimism also came with Minister of State for Finance Anurag Thakur's statement that the central government is making efforts to turn India into a manufacturing and export powerhouse. Thakur said manufacturing will now be broad-based in the country. Besides, the Ministry of Finance has released the 10th weekly instalment of Rs 6,000 crore to the States. Out of this, an amount of Rs 5,516.60 crore has been released to 23 States and an amount of Rs 483.40 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir & Puducherry) who are members of the GST Council. The remaining 5 States, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation. Finally, the BSE Sensex rose 260.98 points or 0.54% to 48,437.78, while the CNX Nifty was up by 66.60 points or 0.47% to 14,199.50.

 

The US markets ended higher on Tuesday as traders generally remain optimistic about an economic recovery despite the recent spike in coronavirus cases. Energy stocks helped to lead the rebound on Wall Street, benefiting from a substantial increase by the price of crude oil. Reflecting the strength in the energy sector, the Philadelphia Oil Service Index skyrocketed by 7.5 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index surged up by 5.1 percent and 4.8 percent, respectively. Significant strength also emerged among steel stocks, as reflected by the 3.7 percent jump by the NYSE Arca Steel Index. The index ended the session at its best closing level in well over two years. Adding to the positive sentiment, a report released by the Institute for Supply Management showed an unexpected acceleration in the pace of growth in manufacturing activity in the month of December. The ISM said its manufacturing PMI climbed to 60.7 in December after dipping to 57.5 in November, with a reading above 50 indicating growth. Street had expected the index to edge down to 56.6. With the unexpected increase, the manufacturing index reached its highest level since hitting 61.3 in August of 2018.  

 

Crude oil futures ended higher on Tuesday lifted by an announcement from Saudi Arabia that it will cut crude production by 1 million barrel per day from February through March. The decision of the Organization of the Petroleum Exporting Countries (OPEC) and its allies to hold output steady in February further helped push up oil prices. Tensions in the Middle East after Iran detained a South Korean vessel carrying ethanol in the Straits of Hormuz also contributed to the jump in oil prices. Crude oil futures for February rose $2.31 or 4.9 percent to settle at $49.93 a barrel on the New York Mercantile Exchange. March Brent crude gained $2.51 or 5 percent to settle at $53.60 a barrel on London's Intercontinental Exchange.

 

Indian rupee concluded weaker against dollar on Tuesday on account of continued dollar demand from importers and banks. Sentiments were dented as India's tax pie seems to have undergone a subtle change with a sharp drop in direct tax collections resulting from a disproportionate impact of the COVID-19 carnage on incomes. Adding pessimism, a report stated that under the Trump administration, US-India tensions have increased over each side's tariff policies. It also noted that the two sides have also held concerted negotiations to address these trade frictions. On the global front; dollar fell against a basket of major currencies on Tuesday after China lifted its official yuan exchange rate to its highest level in 30 months, helping support demand for other currencies. Finally, the rupee ended at 73.17, 15 paise weaker from its previous close of 73.02 on Monday.

 

The FIIs as per Tuesday's data were net buyer in both equity and debt segment. In equity segment, the gross buying was of Rs 7815.36 crore against gross selling of Rs 5056.70 crore, while in the debt segment, the gross purchase was of Rs 1641.20 crore with gross sales of Rs 605.41 crore. Besides, in the hybrid segment, the gross buying was of Rs 7.28 crore against gross selling of Rs 3.51 crore.

 

The US markets ended higher on Tuesday in choppy trading as investors anxiously awaited results of US runoff elections in Georgia that would determine the legislative balance of power in the world's largest economy. Asian markets are trading mixed on Wednesday as investors anxiously awaited results of US runoff elections that would determine the legislative balance of power in the world's largest economy while oil prices rose on news of planned output cuts. Indian markets ended at record high levels on Tuesday led by strong buying in the IT and private banks. Today, the markets are likely to make cautious start amid mixed Asian cues. Also, investors will be eyeing Markit Services PMI data for December slated to be released later in the day for further cues. Rising coronavirus cases in the country are likely to dampen sentiments in markets. With 17,908 fresh Covid-19 cases, India's caseload now stands at 10,375,478. The country's death toll has crossed the 150,000-mark. One more patient at a Delhi government-run hospital has been found infected with the UK strain of novel coronavirus, taking the tally in the national capital to nine. Traders will be concerned with the World Bank's statement that India's economy is estimated to contract by 9.6 percent in the fiscal year 2020-21, reflecting a sharp drop in household spending and private investment, and the growth is expected to recover to 5.4 percent in 2021. However, some respite may come later in the day as the finance ministry said the impending vaccination drive in various countries, coupled with sustained improvement in high frequency indicators, helped the economy perform better in H2FY21. Some support may come with report that Union Health Secretary Rajesh Bhushan said the government has not banned the export of COVID-19 vaccines. The Ministry of Health, Ministry of Commerce and Industry, Department of Promotion of Industry and Internal Trade (DPITT) or the Directorate General of Foreign Trade (DGFT) have not made any changes to export rules, thus, vaccine exports are allowed. Traders may take note of report that the Union Budget for 2021-2022 will be presented on February 1. The Cabinet Committee on Parliamentary Affairs (CCPA) has said the Budget will be presented on February 1 and President Ram Nath Kovind will address a joint sitting of both the Houses of Parliament on January 29. Meanwhile, the Reserve Bank of India has introduced the Legal Entity Identifier (LEI) for large value transactions over Rs 50 lakhs in Centralised Payment Systems, which will be effective from April 1, 2021. Logistics industry stocks will be in focus with a private report that the commerce ministry has sought views of different departments on its proposed national logistics policy which aims at enhancing productivity and competitiveness of manufacturers by reducing cost of logistics. There will be some reaction in telecom stocks as the Department of Telecom is expected to issue the notice for upcoming spectrum auction this week that will have timelines and rules to bid for airwaves.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

14,199.50

14,093.24

14,260.69

BSE Sensex

48,437.78

48,065.36

48,648.22

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Motors

757.52

193.20

187.54

196.39

Axis Bank

379.74

664.45

632.34

682.24

State Bank of India

273.93

281.75

278.35

283.80

Oil & Natural Gas Corporation

269.98

94.95

94.04

96.19

Wipro

251.57

406.30

396.60

412.90

 

  • HCL Technologies has completed acquisition of DWS, a leading Australian IT, business and management consulting group. 
  • UltraTech Cement has raised Rs 1000 crore through Unsecured Redeemable NCDs on private placement basis.  
  • Bajaj Finance's consolidated deposit book rose by 18 percent to approximately Rs 23,800 crore as of December 31, 2020 as compared to Rs 20,235 crore as of December 31, 2019. 
  • HDFC has reported that its individual loan business continued to see improvements during the quarter ended December 31, 2020.
News Analysis