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Market Commentary 01 December 2021
Markets to open in green on positive GDP data


Indian equity benchmarks failed to hold intraday gains in a choppy session and closed the session in red terrain on Tuesday, as global cues turned bearish. Domestic benchmark indices started trade in the positive territory, as traders took encouragement with Minister of State for Finance Pankaj Chaudhary's statement the net direct tax collection grew nearly 68 per cent during April 1 to November 23 to more than Rs 6.92 lakh crore. Some support came in as India Ratings expects the economy to grow 8.3 per cent in Q2 and close the year with 9.4 per cent in FY'22. Buying further crept in with Crisil Ratings in its latest report stated that after weathering multiple challenges over the past three fiscals, asset under management (AUM) of non-banking financial companies' (NBFCs) and housing finance companies (HFCs) is set to grow 8-10 percent in the fiscal 2023, helped by improvement in economic activity and strengthened balance sheet buffers. Some optimism also came in with private report that data was expected to show that India's economic recovery strengthened in the July-September quarter, helped by a pick-up in consumer spending, though the spread of the Omicron coronavirus variant raised fears for the future. However, the markets saw selling pressure towards fag-end of the session, as investors awaited gross domestic product (GDP) data that is expected to show the country's economic recovery strengthened in the second quarter. Traders remained cautious amid report that seven people arrived from South Africa in Maharashtra's Thane city adjoining Mumbai since November 14 and all of them were tested in the wake of concerns over the new potentially more transmissible 'Omicron' variant of the coronavirus. Some cautiousness also crept in as Moody's Analytics said the Omicron variant of COVID-19 adds new uncertainties to the global economic outlook but much will depend on its speed of transmission, hospitalization and death rates, and also the effectiveness of vaccines. Finally, the BSE Sensex fell 195.71 points or 0.34% to 57,064.87 and the CNX Nifty was down by 70.75 points or 0.41% to 16,983.20.


The US markets ended lower on Tuesday on renewed concerns about the new coronavirus variant after Moderna's (MRNA) CEO said Covid-19 vaccines are likely to be less effective against Omicron. Moderna CEO Stephane Bancel said that it would take a couple of weeks to determine how much the mutations have affected the efficacy of the vaccines currently available in the market. Regeneron Pharmaceuticals (REGN) has also warned its Covid-19 antibody cocktail and similar drugs could be less effective against the Omicron variant. Markets saw further downside after Federal Reserve Jerome Powell suggested during Congressional testimony that the central bank would discuss accelerating the pace at which it reduces its asset purchases during the next monetary policy meeting. Powell said At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, perhaps a few months sooner. In early November, the Fed announced plans to begin reducing its $120 billion in monthly bond purchases by $15 billion per month.


Crude oil futures ended sharply lower on Tuesday, suffering their worst monthly decline since March 2020, on fresh concerns about the outlook for oil demand after the chief executive of Moderna Inc. warned that vaccines are likely to be less effective against the omicron variant of the coronavirus that causes COVID-19. Further, the dollar's rebound into positive territory, albeit for a brief while, further weighed on oil prices. The dollar recovered after Federal Reserve Chairman indicated the central bank could hasten a tightening of monetary policy. Benchmark crude oil futures for January delivery dropped $3.77 or 5.4 percent to settle at $66.18 a barrel on the New York Mercantile Exchange. Brent crude for February delivery fell $3.99 or 5.5 percent to settle at $69.23 a barrel on London's Intercontinental Exchange.


Continuing previous session drubbing, Indian rupee concluded weaker against dollar on Tuesday on account of continued dollar demand from importers and banks. This is the fourth consecutive session when the rupee traded lower against dollar. Sentiments were impacted after drugmaker Moderna's CEO set off fresh alarm bells in financial markets after he warned that COVID-19 vaccines were unlikely to be as effective against the Omicron variant as they have been against the Delta version. On the global front, euro surged on Tuesday and is on track for its biggest three-day rising streak this year as traders cut their short positions on the single currency after Moderna's CEO said COVID-19 vaccines are unlikely to be as effective against the Omicron variant as they have been with other types. Finally, the rupee ended 75.13, weaker by 6 paise from its previous close of 75.07 on Monday.


The FIIs as per Tuesday's data were net sellers in equity segment and net buyers in debt segment. In equity segment, the gross buying was of Rs 6729.31 crore against gross selling of Rs 10372.39 crore, while in the debt segment, the gross purchase was of Rs 857.33 crore against gross selling of Rs 335.09 crore. Besides, in the hybrid segment, the gross buying was of Rs 6.53 crore against gross selling of Rs 9.89 crore.


The US markets ended lower on Tuesday after Fed chairman Jerome Powell hinted of wrapping up tapering of bond purchases a few months sooner, citing inflation risk. Asian markets are trading mostly in green on Wednesday despite the broadly negative cues overnight from Wall Street, after the Japanese government stepped up virus containment measures on confirming the country's first Omicron variant case. Indian markets failed to hold gains on Tuesday, witnessing a volatile trading session that forced Sensex, Nifty to close in red. Today, markets are likely to start the session on a positive note on better-than-expected macro-economic data amid gains across other Asian markets coupled with fall in crude oil prices. Investors will be eyeing Manufacturing PMI data to be out later in the day. Sentiments will get a boost as India's gross domestic product (GDP) in the second quarter of the fiscal year 2021-22 grew at 8.4 percent. The numbers mark a significant increase as compared to the COVID-19-hit second quarter of last fiscal year, when the GDP had declined by 7.4 percent. Besides, S&P Global Ratings kept India's economic growth forecast in the fiscal year to March 2022 unchanged at 9.5 per cent but raised its predictions for the subsequent year on broadening out of the recovery. Some support will come with government data showing that the combined output of eight core industries has surged by 7.5 percent in October, as compared to the same period last year. Also, the latest data from the Reserve Bank of India (RBI) showed that credit growth to industry picked up to 4.1 percent in October 2021 from a contraction of 0.7 percent in October 2020. Meanwhile, according to the data released by the Controller General of Accounts (CGA), the Union government's fiscal deficit works out to be Rs 5.47 lakh crore or 36.3 per cent of the budget estimates at the end of October 2021 on the back of improvement in revenue collection. However, there may be some cautiousness as a periodic labour force survey by the National Statistical Office (NSO) showed that unemployment rate for all ages in urban areas rose to 9.3 per cent in January-March 2021 from 9.1 per cent in the same month of the previous year. Foreign fund outflow is likely to keep sentiments in the markets down bit. Foreign portfolio investors (FPIs) remained net sellers for Rs 5445.25 crore in the Indian markets. Auto stocks will be in limelight reacting to their sales numbers to be out later in the day. There will be some reaction in fertilizer industry stocks with a private report that India plans to increase 2021/22 fertiliser subsidies to a record of more than 1.55 trillion rupees ($20.64 billion) to avoid shortages amid a sharp increase in global prices of the chemicals. Star Health and Allied Insurance Company IPO was subscribed 12 per cent at the end of Day 1. The retail quota was subscribed 64 per cent. Tega Industries IPO will open for subscription today. The mill-liner producer's company aims to raise Rs 619 crore and has fixed a price band of Rs 443-453 per share.


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



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  • Coal India is planning to spend an estimated Rs 19,650 crore to strengthen its rail infrastructure. 
  • SBI has entered into a co-lending agreement with Capri Global Capital to offer MSME loans. 
  • Maruti Suzuki India has increased the price of EECO (all non-Cargo variants) owing to introduction of Passenger Airbag.  
  • Fitch Ratings has affirmed Axis Bank's Long-Term Issuer Default Rating at BB+ with negative outlook.
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