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NSE Intra-day chart (01 June 2022)
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Market Commentary 02 June 2022
Benchmarks likely to open in red amid weak global cues

 

Indian equity benchmarks traded volatile and ended lower for the second consecutive session on Wednesday, amid worsening geopolitical situation in Europe. Moreover, rising bond yields in the debt market also soured markets mood. Benchmark indices made a cautious start, as traders were concerned with the government data showed that India's economic growth hit a four-quarter low of 4.1%, partly driven by base effect. The growth was 20.1%, 8.4%, and 5.4%, in the first, second and third quarters, respectively. However, markets entered green terrain in the late morning session, taking support from chief economic adviser (CEA) V Anantha Nageswaran said the Indian economy is better placed than other countries and the fear of stagflation is exaggerated. Some support also came with government data showing that production growth of eight infrastructure sectors rose to a six-month high of 8.4 per cent in April on the back of better performance by coal, refinery products and electricity segments. Key gauges managed to trade in green in afternoon deals, as a monthly survey said that India's manufacturing sector growth steadied in May, with new orders and production increasing at similar rates to those registered in the previous month, while demand showed signs of resilience and improved further despite another uptick in selling prices. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) stood at 54.6 in May, little changed from 54.7 in April, pointing to a sustained recovery across the sector. But, after the initial uptick, the benchmark drifted gradually lower, amid reports that India's annual per capita income at constant prices remained below the pre-COVID level at Rs 91,481 in 2021-22. However, the per capita income based on Net National Income (NNI) at constant price grew by 7.5 per cent in FY22 over the previous year. Traders overlooked the Finance Ministry stating that GST revenues bucked the two-month rising trend in May and stood at nearly Rs 1.41 lakh crore, registering a year-on-year increase of 44 percent. Finally, the BSE Sensex fell 185.24 points or 0.33% to 55,381.17 and the CNX Nifty was down by 61.80 points or 0.37% to 16,522.75.

 

The US markets ended lower on Wednesday after Construction spending in the US increased by less than expected in the month of April, according to a report released by the Commerce Department. The report showed construction spending edged up by 0.2 percent to an annual rate of $1.745 trillion in April after rising by 0.3 percent to a revised rate of $1.741 trillion in March. Street had expected construction spending to climb by 0.5 percent compared to the 0.1 percent uptick originally reported for the previous month. The modest increase in construction spending came as spending on private construction rose by 0.5 percent to an annual rate of $1.395 trillion. A 0.9 percent advance in spending on residential construction was partly offset by a 0.2 percent dip in spending on non-residential construction. Meanwhile, the report showed spending on public construction slid by 0.7 percent to an annual rate of $350.1 billion. Meanwhile, a majority of the twelve Federal Reserve districts have recently experienced slight or modest economic growth, according to the central bank's Beige Book. The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, said four districts explicitly noted that the pace of growth had slowed since the prior period. The slower growth comes as retail contacts noted some softening as consumers faced higher prices, and residential real estate contacts observed weakness as buyers faced high prices and rising interest rates. On the sectoral front, Airline stocks turned in some of the market's worst performances on the day, resulting in a 4.3 percent nosedive by the NYSE Arca Airline Index. Considerable weakness was also visible among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index falling by 2 percent and 1.6 percent, respectively.

 

Crude oil futures ended higher on Wednesday lifted by the European Union's decision to impose a phased ban on Russian oil, and hopes about increased energy demand from China following easing of coronavirus restrictions in Shanghai. Meanwhile, the Organization of the Petroleum Exporting Countries and their allies led by Russia, collectively known as OPEC+, is scheduled to meet on Thursday to set policy. Benchmark crude oil futures for July delivery rose 59 cents or 0.5% percent to settle at $115.26 a barrel on the New York Mercantile Exchange. Brent crude for August delivery gained 69 cents or 0.6 percent to settle at $116.29 a barrel on London's Intercontinental Exchange.

 

Erasing previous session losses, Indian Rupee ended fairly higher against US dollar on Wednesday. Sentiments were upbeat with data showing that India's fiscal deficit stood at 6.7 percent of GDP in 2021-22 on higher tax receipts and prudent expenditure, lower than 6.9 percent estimated in the national budget tabled in February. The improved fiscal performance will reduce the extent of fiscal roll back required in the current fiscal year compared to the last. On the global front, euro edged further away from a one-month high on Wednesday and the U.S. dollar nudged up, lifted by higher Treasury yields as global inflation worries flared anew. Finally, the rupee ended at 77.52 (Provisional), stronger by 19 paise from its previous close of 77.71 on Tuesday.

 

The FIIs as per Wednesday's data were net sellers in equity segment and net buyers in debt segment. In equity segment, the gross buying was of Rs 45140.04 crore against gross selling of Rs 46134.71 crore, while in the debt segment, the gross purchase was of Rs 832.80 crore against gross selling of Rs 427.50 crore. Besides, in the hybrid segment, the gross buying was of Rs 77.85 crore against gross selling of Rs 41.77 crore.

 

The US markets ended lower on Wednesday as investors bet that the latest economic data would do nothing to push the Federal Reserve off track from its aggressive interest rate hiking cycle aimed at taming run-away inflation. Asian markets are trading mostly in red on Thursday tracking overnight losses on Wall Street. Indian markets finished a volatile session in the red on Wednesday, dragged by IT and FMCG shares though gains in financial shares limited the downside. Today, markets are likely to open in red tracking weakness across global markets amid concerns that latest economic data might do nothing to push the Fed off track from its aggressive interest rate hiking cycle. Investors will also watch out for OPEC+ meeting today, to see if any likely ease in oil prices could come if the group decides to increase production than its previous levels. Traders will be concerned as the Ministry of Finance said the gross GST (Goods and Services Tax) revenue for the month of May crossed over Rs 1.40 lakh crore, a 16.6 per cent drop in comparison to April when GST collections were at a record high. There will be some cautiousness with a private report that even as the government is planning to put a leash on wasteful revenue spending to rein in fiscal deficit, it has decided against trimming the record budgetary capital expenditure target for FY23, betting big on its high multiplier effect to spur growth. The finance ministry has asked various infrastructure ministries to ensure they realise their capex goals and create durable assets. Meanwhile, NITI Aayog Chief Executive Officer Amitabh Kant has said that Aadhaar has become the bedrock for the government's welfare schemes and has saved over Rs 2 lakh crore to the government by eliminating fake and duplicate identities. There will be some buzz in the insurance industry stocks as in a bid to improve ease of doing business, regulator Irdai has allowed insurers to offer health and most of the general insurance products to customers without its prior approval. Aviation industry and hotel industry stocks will be in focus as Jet fuel prices were cut by 1.3 per cent -- the first reduction after 10 rounds of price hikes -- on softening international crude oil rates. Simultaneously, prices of commercial LPG - used by business establishments such as hotels and restaurants - were reduced by Rs 135 per 19-kg cylinder. There will be some reaction in FMCG industry stocks with a private report that the FMCG industry saw decline in volume in the January-March period as consumption was impacted by price increases, especially in the food and essentials categories. Railways stocks will be in limelight with report that fuelled by demand for coal and cement, the railways ferried 131.7 million tonnes (mt) of raw materials and goods in May, earning a revenue of Rs 14,113 crore. The revenue earned is 22 per cent higher than the corresponding period last year.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

16,522.75

16,424.66

16,635.01

BSE Sensex

55,381.17

55,051.23

55,751.29

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Coal India

308.67

196.80

194.24

198.34

Oil & Gas corporation of India

227.80

150.10

148.26

152.41

NTPC

160.84

157.05

155.46

159.41

ITC

146.99

271.50

269.76

273.66

Hindalco Industries

125.51

410.40

403.74

419.54

 

  • Coal India's coal production has increased by 30% to 54.7 million tonnes in May 2022 as against 42.1 MT in May 2021. 
  • Oil and Natural Gas Corporation is eyeing 11% rise in crude oil production and 25% jump in natural gas output after newer discoveries in the western and eastern offshore start producing. 
  • NTPC has come out with its biodiversity policy 2022 for conservation and restoration of a balanced ecosystem.  
  • HCL Technologies' wholly owned subsidiary -- HCL Technologies UK has completed the acquisition of 100% stake in Confinale AG.
News Analysis