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Market Commentary 03 October 2022
Markets to get pessimistic start of new week amid weak global cues


Snapping a 7-day losing streak, Indian equity benchmarks ended with strong gains on Friday, as investors cheered the RBI MPC announcement of the repo rate hike. Key gauges opened with minor cuts as traders were concerned as the RBI said India's current account deficit (CAD) in April-June was at $23.9 billion, or 2.8 per cent of gross domestic product (GDP), much higher than the $13.4 billion, or 1.5 per cent of GDP, in January-March 2022. Besides, foreign institutional investors sold a net Rs 35.99 billion ($441.7 million) worth of equities on Thursday, as per provisional data available with the National Stock Exchange. However, key indices turned green and witnessed strong momentum in morning deals, after the Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) announced a 50 basis points (bps) hike in the repo rate to 5.90 per cent on Friday in order to bring elevated inflation back to its target. Sentiments remained up-beat with S&P Global Ratings' statement that rising rates and increased European energy insecurity are hitting growth in almost every country, but India with an estimated 7.3 per cent growth this fiscal, would be the star among emerging market economies. Traders also found support with Union Minister Piyush Goyal's statement that India will be the pillar of the global economic revival as it exhibited steady growth and emerged as the fastest-growing country among large economies of the world. Some optimism also came as Economic Affairs Secretary Ajay Seth said India's economic recovery remains on course, supported by key structural reforms, despite exogenous shocks and challenges. Adding to the optimism, India climbed six notches to 40th position in the Global Innovation Index 2022 on account of improvement in several parameters. According to a report by the Geneva-based World Intellectual Property Organization (WIPO), Switzerland, the United States, Sweden, the United Kingdom and the Netherlands are the world's most-innovative economies. Traders also took a note of report that the Centre has reduced its borrowing target for the financial year 2022-23 (FY23) by Rs 10,000 crore to Rs 14.21 trillion amid robust tax collections. Finally, the BSE Sensex rose 1016.96 points or 1.80% to 57,426.92 and the CNX Nifty was up by 276.25 points or 1.64% to 17,094.35.


The US markets closed significantly lower on Friday on lingering concerns about the global economic outlook amid aggressive interest rate hikes by central banks around the world. A steep drop by shares of Nike (NKE) weighed on the Dow, with the athletic footwear and apparel giant plunging by 12.8 percent. Nike fell sharply after reporting better than expected fiscal first quarter earnings and revenues but warning it will need to cut prices amid a surge in inventories. Adding more pessimism, a reading on inflation said to be preferred by the Federal Reserve showed an acceleration in the pace of core consumer price growth in the month of August. The Commerce Department report showed the annual rate of core consumer price growth accelerated to 4.9 percent in August from a revised 4.7 percent in July. Street had expected the annual rate of growth in core consumer prices, which exclude food and energy prices, to tick up to 4.7 percent from the 4.6 percent originally reported for the previous month. A separate report released by the University of Michigan showed one-year inflation expectations edged down to 4.7 percent in September from 4.8 percent in August, hitting the lowest level since last September. Five-year inflation expectations also dipped to 2.7 percent in September from 2.9 percent in August, falling below the 2.9-3.1 percent range for the first time since July 2021. MNI Indicators also released a report showing an unexpected contraction in Chicago-area business activity in the month of September. Meanwhile, investors remained on sidelines ahead to the Labor Department's monthly jobs report to be out next week.


Crude oil futures wiped out early gains and ended sharply lower on Friday amid worries about demand outlook with aggressive monetary tightening by central banks raising the risk of a recession. Initially, oil prices traded higher amid speculation OPEC producers will announce an output cut after their meeting on October 5. The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, is scheduled to meet next week. It is expected that the group will agree to cut crude output in order to support falling prices. Benchmark crude oil futures for November delivery fell $1.74 or 2.1 percent at $79.49 a barrel on the New York Mercantile Exchange. Brent crude for December delivery dropped $2.04 or about 2.3 percent to settle at $85.14 a barrel on London's Intercontinental Exchange.


Indian rupee ended significantly higher against dollar on Friday as RBI raised repo rate to rein in inflation. Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has raised repo rate by 50 basis points (bps) to 5.90 percent in a bid to check inflation, which has remained above its tolerance level for the past 8 months. Sentiments were also upbeat with Union Minister Piyush Goyal's statement that India will be the pillar of the global economic revival as it exhibited steady growth and emerged as the fastest-growing country among large economies of the world. On the global front, sterling rose on Friday moving close to levels last seen before the new government's so-called mini budget a week ago sent the currency to a record low against the U.S. dollar. Finally, the rupee ended at 81.49 (Provisional), stronger by 24 paisa from its previous close of 81.73 on Thursday.


The FIIs as per Friday's data were net sellers in both equity and debt segment. In equity segment, the gross buying was of Rs 8820.33 crore against gross selling of Rs 12693.81 crore, while in the debt segment, the gross purchase was of Rs 155.56 crore against gross selling of Rs 953.40 crore. Besides, in the hybrid segment, the gross buying was of Rs 33.59 crore against gross selling of Rs 36.33 crore.


The US markets ended lower on Friday with historically hot inflation, rising interest rates and recession fears. Asian markets are trading mostly in red on Monday tracking sell-off on Wall Street. Indian markets halted the 7-day losing streak and ended higher on Friday after RBI hiked key policy rates on expected lines. Today, start of holiday shortened week is likely to be negative amid weak global cues and mixed economic data on domestic front. Markets will remain close on Wednesday on account of Dussehra. Traders will be concerned as the government data showed that the output of eight core infrastructure sectors grew 3.3 per cent in August -- the lowest in nine months -- as against 12.2 per cent in the year-ago period. The latest data on public debt showed that the total liabilities of the government increased to Rs 145.72 lakh crore at the end-June 2022 from Rs 139.58 lakh crore at end-March 2022. More pessimism may come as foreign investors turned sellers again in September and pulled out over Rs 7,600 crore from the Indian equity markets amid hawkish stance by the US Fed and sharp depreciation in rupee. Besides, the data released by the Controller General of Accounts (CGA) showed that the central government's fiscal deficit touched 32.6 per cent of the annual target in the current financial year till August as against 31.1 per cent recorded a year ago. However, some respite may come later in the day as Finance minister Nirmala Sitharaman said inflation is at a manageable level. She added that we are in an era of robust economic activities. Traders may be taking encouragement as the finance ministry said GST collections remained above Rs 1.40 lakh crore for the seventh month in a row at Rs 1.47 lakh crore in September, a 26 per cent increase over last year, reflecting buoyancy in tax collection and stability of the GST portal. Some optimism may come as data released by the Centre for Monitoring Indian Economy (CMIE) said India's unemployment rate dropped drastically to 6.43 per cent in September on the back of increase in labour participation in the rural and urban areas. Meanwhile, Union Transport Minister Nitin Gadkari said India is the fastest growing economy. He added that India can become a super economic power given its economic potential. There will be some buzz in Telecom industry stocks as after Prime Minister Narendra Modi launched the 5G services in India. Aviation industry stocks will be in limelight as the rates of aviation turbine fuel (ATF) were cut marginally by 4.5 per cent. Jet fuel price was cut by Rs 5,521.17, or 4.5 per cent, to Rs 115,520.27 pr kl in the national capital. There will be some reaction in oil & gas sector stocks as prices of natural gas, which is used to generate electricity, make fertiliser and is converted into CNG to run automobiles, were hiked by a steep 40% to record levels, in step with global firming up of energy rates. Auto industry stocks will be in focus as Federation of Automotive Dealers Associations said the hike in key interest rate by RBI is a big dampener for the automobile industry particularly for the price sensitive entry-level two-wheelers and passenger vehicles segments. Also, auto stocks will be reacting to their monthly sales numbers.


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  • Adani Ports and Special Economic Zone has incorporated a Wholly Owned Subsidiary namely, Adani Aviation Fuels, on September 29, 2022. 
  • Hero MotoCorp is finalizing a collaboration agreement with Zero Motorcycles, the California (USA)-based manufacturer of premium electric motorcycles and powertrains.
  • Reliance Industries' subsidiary -- Jio Platforms has signed an agreement with the ICAI to upskill users of the telecom service provider through audio-video content developed by ICAI.
  • Adani Enterprises' wholly owned subsidiaries -- BHRPL, HURPL and UPRPL have achieved financial closure for the access-controlled six lane (expandable to eight lane) greenfield Ganga Expressway Project (Group-II, III & IV) in Uttar Pradesh respectively on DBFOT (Toll) basis under PPP mode.
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