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NSE Intra-day chart (03 January 2024)
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Market Commentary 04 January 2024
Benchmarks likely to get positive start on Thursday

Indian equity benchmarks ended lower for the second straight day with losses of over half percent on Wednesday due to sharp selloff in Metal, IT and TECK counters amid weak global trends. Traders also awaited Q3 earnings from India Inc, which kicks off next week. Markets made a negative start and traded with a negative bias throughout the day as traders got anxious with the HSBC India Manufacturing PMI survey, conducted by S&P Global, showing India's manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, was recorded at an 18-month low of 54.9 in December as against 56.0 in November. Despite the fall, the HSBC India Manufacturing PMI was indicative of a marked improvement in the health of the sector. It also showed the sector still expanding strongly in December despite a loss of growth momentum. Some cautiousness also prevailed in the markets with ICRA's report stating that at the first weekly auction of the last quarter of 2023-24, the states saw their interest burden sharply rising to cross the 7.7 percentage mark on Tuesday, leading to the spread between the cut-off of 10-year state bonds and the G-sec yield crossing the 50 basis points mark for the first time in two years. Sentiments remained down-beat in late afternoon deals, amid crude oil price fluctuations as tensions are on a rise with Iran's deployment of a warship in the Red Sea in response to the US Navy destroying three Houthi boats. Traders overlooked a private report projecting a much lower current account deficit which is likely to print at 1 per cent for this fiscal, leaving the balance of payment surplus at $39 billion, as the country's external balances are stronger than expected on the back of strong inflows. Traders also paid no heed towards a report by economic think tank GTRI stating that countries ranging from large economies like Europe, and the UK to smaller ones, including Oman and Peru, want to have a free trade agreement with India due to the country's large and rapidly growing market. Finally, the BSE Sensex fell 535.88 points or 0.75% to 71,356.60 and the CNX Nifty was down by 148.45 points or 0.69% to 21,517.35.

The US markets ended lower with Nasdaq settling cut of over one percent after the minutes of the Federal Reserve's latest monetary policy meeting reiterated officials widely expect to begin lowering interest rates in 2024, although they also highlighted an unusually elevated degree of uncertainty about the outlook for rates and the economy. Projections provided by Fed officials at the December 12-13 meeting suggested three quarter point rate cuts by the central bank are likely by the end of 2024. The forecasts were backed up by the minutes, which said baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024. However, the minutes said participants also noted an unusually elevated degree of uncertainty and that it was possible further rate increases could be appropriate. The minutes said several participants also observed that circumstances might warrant keeping rates at current levels for longer than they currently anticipated. The minutes indicated the high degree of uncertainty surrounding the economic outlook was partly due to the possibility that the momentum of economic activity may be stronger than currently assessed, posing an upside risk to both inflation and economic activity. On the economic data front, a report released by the Institute for Supply Management (ISM) showed U.S. manufacturing activity contracted at a slightly slower rate in the month of December. The ISM said its manufacturing PMI rose to 47.4 in December from 46.7 in November, but a reading below 50 still indicates contraction. Street had expected the index to inch up to 47.1. The uptick by the headline index partly reflected a turnaround by production, with the production index climbing to 50.3 in December from 48.5 in November.

Crude oil futures ended sharply higher on Wednesday amid concerns about further attacks by Houthi militants against ships in the Red Sea as well as reports protests in Libya have forced the shutdown the Sharara oil field, which produces up to 300,000 barrels per day. Meanwhile, crude oil also benefitted from the release of a statement from OPEC and their allies reiterating their full commitment to their continued and unwavering efforts to maintain oil market stability going forward. Benchmark crude oil futures for February delivery rose by $2.32 or 3.3 percent to settle at $72.70 a barrel on the New York Mercantile Exchange. Brent crude for March delivery surged by $2.36 or 3.10 percent to settle at $78.25 a barrel on London's Intercontinental Exchange.

Indian rupee ended marginally higher against the US dollar on Wednesday, supported by easing crude oil prices and foreign fund inflows. Foreign institutional investors (FIIs) were net buyers in the equity market on Tuesday as they purchased shares worth Rs 1,602.16 crore, according to exchange data. However, gains were limited as India's manufacturing sector growth slowed in the month of December. According to the report, the seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) eased to 54.9 in December 2023 from 56.0 in November 2023. On the global front, the U.S. dollar rose again on Wednesday after jumping the previous day, underpinned by elevated U.S. Treasury yields and a cautious turn that weighed on Wall Street. Finally, the rupee ended at 83.29 (Provisional), stronger by 3 paise from its previous close of 83.32 on Tuesday.

The FIIs as per Wednesday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 10235.61 crore against gross selling of Rs 8640.85 crore, while in the debt segment, the gross purchase was of Rs 1220.65 crore with gross sales of Rs 270.97 crore. Besides, in the hybrid segment, the gross buying was of Rs 26.79 crore against gross selling of Rs 36.42 crore.

The US markets ended lower on Wednesday after minutes of the US Federal Reserve's last meeting showed uncertainty over the rate cut trajectory. Asian markets are trading mostly in red on Thursday led by Japan as the country resumed trading after an extended New Year's holiday during which it witnessed an earthquake and a collision at Tokyo's Haneda airport involving Japan Airlines. Indian markets remained under pressure for a second straight day on Wednesday as risk-off sentiment, spread across global markets, hit domestic shores as well. Today, markets are likely to open in green after two-days of consolidation. Sentiments will get a boost as India Ratings and Research upped India's GDP growth estimate for current fiscal to 6.7 per cent, from 6.2 per cent, citing resilient economy, sustained government capex and prospect of a new private corporate capex cycle. Some optimism will also come as Fitch Ratings said the economic growth in Asia Pacific will remain strong in 2024 and GDP is expected to grow by about 5 per cent in India and a host of emerging market countries. In its report titled APAC Cross-Sector Outlook 2024, Fitch said the outlooks for the banking sectors in India and Indonesia, as well as APAC emerging markets as a whole, move to improving in 2024, partly reflecting the robust economic backdrop. However, gains in the markets are likely to remain capped tracking persistent weakness across global markets. Foreign fund outflows also likely to dent sentiments. Foreign institutional investors (FIIs) sold shares worth Rs 666.34 crore on January 3, provisional data from the NSE showed. Auto stocks will be in focus as the Union Finance Ministry sanctioned an additional Rs 1,500 crore for the second phase of the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME-II) programme, addressing fears that funds could run out before the scheme ends in March 2024 due to robust electric vehicle (EV) sales. A proposal to increase the outlay for FAME-II from Rs 10,000 crore to Rs 11,500 crore was approved by the department of expenditure (DoE) on January 2. There will be some reaction oil & gas industry stocks amid a private report that oil demand in India is expected to remain positive this year despite worries over an industrial slowdown in China affecting related economies, and a cut in global crude production. Sugar industry stocks will be in limelight as the government notified exports of 8,606 tonnes of raw cane sugar under tariff-rate quota (TRQ) to the US for 2024. The directorate general of foreign trade (DGFT) in a public notice said that this quantity has been notified under the TRQ scheme from October 1, 2023-September 30, 2024. There will be some buzz in metal stocks as Icra said global prices of metals, including aluminium, are unlikely to improve considerably in the near term due to uncertainties in the global macroeconomic environment.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,517.35

21,452.80

21,629.45

BSE Sensex

71,356.60

71,153.04

71,711.07

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

451.77

135.00

133.04

138.29

Adani Ports & SEZ

330.61

1095.40

1057.44

1138.69

ITC

240.36

477.45

470.96

482.31

Adani Enterprises

197.25

3005.00

2907.40

3150.80

ICICI Bank

168.27

986.35

978.30

991.20

  • Tata Motors has supplied 100 electric buses to Assam State Transport Corporation.
  • Sun Pharmaceutical Industries has acquired 100% of shares of Libra Merger, a company incorporated in Israel.
  • LTIMindtree along with Farmers Edge has launched the Farmers Edge Innovation Lab (FEIL) in Mumbai.
  • Dr. Reddy's Laboratories has acquired MenoLabs business, a leading women's health and dietary supplement branded portfolio from Amyris, Inc. (Amyris) in Amyris' Chapter 11 sales process.

News Analysis