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Market Commentary 01 January 2024
Markets likely to get a cautious start of New Year

Snapping a five-session rally, Indian equity benchmarks ended lower on the final trading session of 2023, due to a drop in Oil & Gas, Energy and PSU stocks. The indices made a negative start and stayed in red for whole day as traders were concerned with the RBI's Financial Stability Report stating that the increase in risk weights for personal loans and loans to non-banking financial companies (NBFCs) may lead to a decline in the capital adequacy ratio of 71 basis points (bps) of the banking system. Some pessimism also came as Shashanka Bhide, one of the three external members of the Monetary Policy Committee (MPC), flagged a weak consumption demand as a key vulnerability for growth in the second half of the current fiscal as well as the next financial year. However, losses remained capped as traders took support with Assocham's statement that India is likely to remain the fastest-growing major economy in the world in 2024 on the back of strong consumer demand leading to a pick-up in investment across sectors such as construction, hospitality and infrastructure including railways and aviation. Some support also came with report that the government is working on boosting domestic manufacturing and increasing exports to $500 billion by 2030 from 10-11 sectors. The 11 sectors are auto components, automobiles (including EVs), capital goods, chemicals, drones, medical devices, aerospace and defence, leather and footwear, textiles, and space. Overall, the ministry is looking at taking the country's goods and services exports to $2 trillion by 2030. Besides, commerce and industry minister Piyush Goyal said the National E-commerce Policy is in final stages of discussion and will be announced soon. Finally, the BSE Sensex fell 170.12 points or 0.23% to 72,240.26 and the CNX Nifty was down by 47.30 points or 0.22% to 21,731.40.

The US markets ended lackluster trade in red terrain on Friday, last trading session of the year 2023, as some traders looked to cash in on the recent strength in the markets. Traders reluctant to make any significant moves ahead of long weekend holiday and important data in the next week. Traders are wait for the release its closely watched monthly jobs report next Friday. Reports on manufacturing and service sector activity may also attract attention along with the minutes of the latest Federal Reserve meeting. On the economic data front, MNI Indicators released a report showing a substantial downturn by Chicago-area business activity in the month of December. MNI Indicators said its Chicago business barometer tumbled to 46.9 in December from 55.8 in November, with a reading below 50 indicating contraction. Street had expected the index to drop to 51.0. On the sectoral front, airline stocks showed a significant move to the downside on the day, dragging the NYSE Arca Airline Index down by 2.0 percent. Considerable weakness also emerged among commercial real estate stocks, as reflected by the 1.2 percent loss posted by the Dow Jones U.S. Real Estate Index. Oil service stocks also moved notably lower amid a modest decrease by the price of crude oil, while weakness was also visible among networking, computer hardware and steel stocks.

Crude oil futures extended their losses for third straight session and settled lower on Friday amid easing concerns about supply disruptions. Oil prices fell sharply in previous session as some shipping companies said they would resume movements through the Red Sea, easing supply concerns. Major firms had stopped using Red Sea routes after Yemen's Houthi militant group began targeting vessels. However, geopolitical tensions in the Middle East continued to support prices. On Friday, Israel intensified its attacks in southern Gaza. Benchmark crude oil futures for January delivery fell by 12 cents or 0.17 percent to settle at $71.65 a barrel on the New York Mercantile Exchange. Brent crude for March delivery dropped by 11 cents or 0.14 percent to settle at $77.04 a barrel on London's Intercontinental Exchange.

Indian rupee ended marginally higher against the US dollar on Friday amid an unabated inflow of foreign funds. Provisional data from the NSE showed that foreign institutional investors (FIIs) bought shares worth Rs 4,358.99 crore on December 28. Traders took some support with Assocham stating that India is likely to remain the fastest-growing major economy in the world in 2024 on the back of strong consumer demand leading to a pick-up in investment across sectors such as construction, hospitality and infrastructure including railways and aviation. However, month-end dollar demand from importers and losses in domestic equity markets weighed on rupee. On the global front, the dollar edged higher on Friday but was still set to end 2023 with a loss, reversing two straight years of gains, dragged down by market expectations that the U.S. Federal Reserve could begin easing interest rates as early as March. Finally, the rupee ended at 83.16 (Provisional), stronger by 4 paise from its previous close of 83.20 on Thursday.

The FIIs as per Friday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 15920.47 crore against gross selling of Rs 10263.65 crore, while in the debt segment, the gross purchase was of Rs 1170.85 crore with gross sales of Rs 293.47 crore. Besides, in the hybrid segment, the gross buying was of Rs 21.63 crore against gross selling of Rs 51.49 crore.

The US markets ended lower on Friday as investors eyed easier monetary policy in the year ahead. Asian markets are closed on Monday on account of new year holiday. Indian markets ended lower on Friday as investors booked profit on the last trading session of 2023 with an aim to avoid any potential global risks over the weekend. Today, the start of the new, week, month and year is likely to be a bit cautious amid a lack of triggers from overseas with most global markets remaining shut. There will be some cautiousness as the output of eight key infrastructure industries - known as the core sector - slowed to a six-month low of 7.8 per cent in November on the back of a high base and festival holidays. Besides, data released by the Controller General of Accounts showed that the central government's fiscal deficit widened to Rs 9.07 lakh crore in April-November from Rs 8.04 lakh crore in April-October. At Rs 9.07 lakh crore, the fiscal deficit for the first eight months of the current financial year accounts for 50.7 percent of the full-year target of Rs 17.87 lakh crore. However, sentiments will get a boost later in the day as the finance ministry expects the Indian economy's GDP growth rate in 2023-24 to comfortably exceed its forecast of 6.5 percent following the blockbuster data for July-September. It added that despite declining in H1 of the current fiscal, FDI inflows to India are expected to rebound on account of strong macroeconomic fundamentals, favourable business environment and rising growth, in the coming months. Some support may come as data released by the Reserve Bank of India showed that India's foreign exchange reserves rose by $4 billion to $620 billion in the week ended December 22. In the current calendar year, the central bank has added $57.59 billion to its kitty as of December 22. Also, in a remarkable comeback, foreign portfolio investors (FPIs) have pumped Rs 1.7 lakh crore into the Indian equity markets in 2023, propelled by confidence in the country's robust economic fundamentals amid a challenging global landscape. There will be some reaction in road & infrastructure industry stocks after Union minister Nitin Gadkari said the government has sanctioned Rs 1,170.16 crore for 29 roads projects in Ladakh. Gems and jewellery stocks will be in limelight as GJEPC said the overall gem and jewellery exports witnessed a on-year decline of 4.52 per cent in November to Rs 19,018.180 crore ($2,263.34 million). Meanwhile, auto stocks will be in focus today, on declaring their monthly sales number for December.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,731.40

21,682.10

21,775.50

BSE Sensex

72,240.26

72,076.27

72,410.64

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

492.03

139.30

137.21

141.31

Tata Motors

411.70

779.40

754.64

803.54

State Bank of India

132.22

641.70

637.64

647.69

ITC

128.88

462.00

459.60

466.15

NTPC

126.83

310.50

307.65

313.85

  • Tata Steel's Natural Resources Division has been honoured with the Golden Peacock Innovation Management Award for the year 2023.
  • UPL has received an intimation on December 28, 2023 about issuance of certificate of incorporation with regards to new step-down subsidiary viz.
  • Bajaj Finserv's subsidiary -- Bajaj Markets has enabled its users to check their CIBIL score for free.
  • Grasim Industries' Chemical Division has successfully commissioned additional 123,000 tons' annual capacity of Advanced Materials (Epoxy Resins and Formulation) manufacturing capacity at Vilayat, District Bharuch, Gujarat.

News Analysis