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Market Commentary 02 January 2024
Benchmarks likely to open in red amid weak Asian cues

Markets started the New Calendar Year on quiet note with frontline gauges ending slightly in green. Key gauges made a negative start in absence on regional cues. Sentiments remained dampened as the output of eight core industries slipped to a six-month low of 7.8 per cent in November 2023 due to a decline in the output of crude oil and cement sectors. The final growth rate of Index of Eight Core Industries for August 2023 is revised to 13.4 per cent. The cumulative growth rate of Index of Eight Core Industries during April to November, 2023-24 is 8.6 per cent (provisional) as compared to the corresponding period of last year. Besides, the 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. However, markets cut losses and entered into green terrain as traders took support with Finance Ministry's statement that Indian economy's GDP growth rate in 2023-24 to comfortably exceed its forecast of 6.5 percent despite the risks to growth and stability outlook that mainly emanate from outside the country. 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. Market exhibited strength and extended gains in last leg of trade, led by optimism on rate cuts, easing global inflation, and softer bond yields. But profit booking in dying hour of trade dragged domestic indices near neutral lines as lingering concerns over Red Sea disruptions pose short-term risks to global supply chains and freight costs. Traders also turned anxious after a series of strong earthquakes hit the western coast of Japan, the country issued tsunami alerts and told people to evacuate the seaside areas. The quakes that took place off the Ishikawa coast, including a preliminary one of 7.6 magnitude. Finally, the BSE Sensex rose 31.68 points or 0.04% to 72,271.94 and the CNX Nifty was up by 10.50 points or 0.05% to 21,741.90.

The U.S. markets were closed on Monday on account New Year's Day holiday.  

Indian rupee started the New Year on a weak note and depreciated against the US dollar on Monday amid dollar demand from importers coupled with lackluster trade in domestic equity markets. Also, trading activity was muted in absence of global cues. Some cautiousness came in as 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. However, downside remained capped amid foreign fund inflows. Foreign Institutional Investors (FIIs) were net buyers in the capital markets on December 29 as they purchased shares worth Rs 1,459.12 crore. Also, data released by the Reserve Bank showed that the forex reserves continued to rise for the third consecutive week, adding $4.471 billion more in the week ending December 22, taking the total to $620.441 billion. Finally, the rupee ended at 83.22 (Provisional), weaker by 6 paise from its previous close of 83.16 on Friday.

The FIIs as per Monday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 10642.64 crore against gross selling of Rs 8535.00 crore, while in the debt segment, the gross purchase was of Rs 1756.57 crore with gross sales of Rs 390.73 crore. Besides, in the hybrid segment, the gross buying was of Rs 3.65 crore against gross selling of Rs 97.99 crore.

The US markets remained close on Monday on account of New Year holiday. Asian markets are trading in red on Tuesday with official data from China over the weekend highlighting a deepening contraction in its manufacturing sector. Markets Japan were shut due to the tsunami warning following a massive earthquake. Indian markets started the new year 2024 on a weak note, but recouped losses and settled into the positive zone on Monday led by steady buying across FMCG and IT shares. Today, start of the session is likely to be in red following weakness in Asian counterparts. Foreign fund outflows likely to dent sentiments. Provisional data from the NSE showed foreign institutional investors (FIIs) sold shares worth Rs 855.80 crore on January 1. Fears over new Covid variant likely to dampen sentiments in the markets. India logged 197 new cases of the JN.1 variant on Monday, the highest from Kerala, while the total number of active Covid-19 infections rose to 4,394 with the detection of 636 fresh cases, according to the INSACOG (Indian SARS-CoV-2 Genomics Consortium) data. Some cautiousness will come as a report by Global Trade Research Initiative (GTRI) said India, despite being one of the few developing countries self-sufficient in food, still shipped in $33 billion of farm products in 2023 with more than half of it just accounted for by vegetable oils. However, some respite may come later in the day as data released by the Ministry of Finance showed that the gross Goods and Services Tax (GST) collections in December 2023 were recorded at Rs 164,882 crore, 10.3 per cent higher than Rs Rs 149,507 crore in December 2022. Some support will come as in order to give a push to the economy, the government relaxed norms governing public expenditure exceeding Rs 500 crore during the fourth quarter (January-March) of the current financial year. The relaxation is subject to strict adherence to the Single Nodal Agency (SNA)/Central Nodal Agency (CNA) guidelines issued by the Department of Expenditure. Meanwhile, the Ministry of Finance said a record high of 8.18 crore Income Tax Returns (ITRs) were filed in assessment year (AY) 2023-24 as of December 31, 2023. The number of ITRs filed marks a 9 percent jump compared to the preceding assessment year when a total of 7.51 crore ITRs were filed. Select banking stocks will be in limelight as the Reserve Bank of India (RBI) said it has decided to enhance the bulk deposit limit for scheduled primary (urban) co-operative banks, in tier 3 and 4 cities, to Rs 1 crore and above. Stocks of Oil & gas, and aviation will be in focus as India hiked the windfall tax on crude oil while reducing the tax on diesel and aviation turbine fuel. The government hiked the windfall tax on petroleum crude oil to Rs 2,300 ($27.63) a ton from Rs 1,300. A tax on diesel of Rs 0.5 per litre was eliminated, as was a Rs 1 per litre windfall tax on aviation fuel. There will be some reaction in pharma stocks with a private report that robust domestic demand and exports to regulated markets will likely provide a booster dose to pharmaceutical sector revenue this fiscal despite tepid export demand from semi-regulated markets on account of currency volatility, low forex reserves and geopolitical risks.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,741.90

21,670.39

21,823.89

BSE Sensex

72,271.94

72,014.81

72,545.49

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

211.86

139.70

138.85

140.75

Tata Motors

125.71

792.00

782.46

800.11

Coal India

111.25

382.00

377.36

386.71

Wipro

101.74

474.80

467.56

482.76

ITC

93.46

465.80

462.31

469.61

  • Power Grid Corporation of India has received an approval for the raising of up to Rs 2,200 crore towards third tranche of Bonds as Unsecured, Non-convertible, Non-cumulative, Redeemable, Taxable POWERGRID Bonds - LXXV (75th) Issue.
  • Eicher Motors and Volvo Group's JV company -- VECV has posted 11.1 per cent rise in total sales at 8026 units in December 2023 as compared to the same month last year. It had sold 7221 units in December 2022.
  • Dr. Reddy's Laboratories' wholly-owned step-down subsidiary -- Dr. Reddy's Laboratories, Inc. has acquired 1,014,442 Preferred A-1 shares of Edity, a biotechnology company.
  • Bajaj Auto has reported rise of 16% in total sales to 3,26,806 units in December 2023 as against 2,81,514 in the same month last year.

News Analysis