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Market Commentary 04 June 2024
Markets to continue rally with optimistic start ahead of election result

Indian equity markets skyrocketed remarkably on Monday, banking on exit poll predictions of continuity and political stability. The exit polls predicted a historic third term for Prime Minister Narendra Modi. The start of the day was on strong note, as positive global cues on the back of encouraging inflation data from the U.S., robust Indian GDP data for the fourth quarter of FY24 and foreign fund inflows boosted investor sentiment. Foreign institutional investors (FIIs) bought shares worth Rs 1,613.24 crore on May 31, while India's Q4 GDP grew 7.8 per cent, beating estimates. Bulls held a tight grip over the Dalal Street during the whole day, as the government data showed that India's goods and services tax (GST) collection in May rose 10 per cent year-on-year (Y-o-Y) to Rs 1.73 trillion, taking overall collection to Rs 3.83 trillion so far in the current financial year (FY25). Besides, the growth of eight core industries rose to 6.2% in April from 6% in March, mainly due to higher growth achieved in natural gas, refinery products, coal, steel and electricity sectors. Sentiments remained optimistic as Prime Minister Narendra Modi said that the Q4 GDP growth data for 2023-24 shows robust momentum in Indian economy which is poised to further accelerate. Adding more relief among traders, India's fiscal deficit - the gap between expenditure and revenue - came in at 5.6% of the Gross Domestic Product (GDP) in FY 2023-24 (FY24), lower than the revised estimate (RE) of 5.8%, amid higher revenue realisation and lower expenditure. Traders overlooked reports that India's manufacturing sector growth eased further in the month of May, signaling a slower but still substantial improvement in the health of the sector. The headline figure was nearly four points higher than its long-run average. According to the survey report, the seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) eased to 57.5 in May as against 58.8 in April. It was 59.1 in March. Finally, the BSE Sensex zoomed 2507.47 points or 3.39% to 76,468.78, and the CNX Nifty was up by 733.20 points or 3.25% points to 23,263.90.

The US markets ended mostly in green on Monday with marginal gains as data showing a contraction in the nation's manufacturing activity in the month of May hurt sentiment. A report from the Institute for Supply Management said manufacturing activity in the U.S. unexpectedly contracted at a slightly faster rate in the month of May, edging down to 48.7 in the month, from 49.2 in April. Street had expected the index to inch up to 49.6. The report also said the prices index slid to 57.0 in May from 60.9 in April, suggesting a slowdown in the pace of price growth. On Wednesday, the ISM is scheduled to release a separate report on service sector activity in the month of May. The services PMI is expected to rise to 50.5 in May from 49.4 in April, with a reading above 50 indicating growth. Preliminary data from the U.S. Censuc Bureau showed US construction spending shrunk unexpectedly in April amid declines in both private and public construction. The report said construction spending dipped 0.1% to $2,099.0 billion from the revised estimate of $2,101.5 billion in March. Spending was expected to grow 0.2 percent after a 0.2 percent decrease in March. The unexpected decrease by the headline index partly reflected a faster contraction in new orders, as the new orders index fell to 45.4 in May from 49.1 in April. The production index also slipped to 50.2 in May from 51.3 in April, although a reading above 50 still indicates growth. Meanwhile, the ISM said the employment index rose to 51.1 in May from 48.6 in April, indicating a rebound by employment during the month.

Crude oil futures ended sharply lower on Monday, weighed down by an announcement by OPEC+ that the group will begin phasing out voluntary production cuts over the next one year. The Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, agreed on Sunday to extend their official crude output cuts into 2025, but also set out a timetable for gradually unwinding some of its oil production cuts starting in October. The OPEC's decision to phase out production cuts will see more than 500,000 bpd of crude returning to the market by December. 1.8 million bpd would come back by June of 2025. Benchmark crude oil futures for July delivery fell $2.77 or about 3.6% to settle at $74.22 a barrel on the New York Mercantile Exchange. Brent crude for July delivery was down $2.75 or about 3.4% to $81.17 per barrel on London's Intercontinental Exchange.

Indian rupee appreciated against the US dollar on Monday tracking over 3 per cent surge in domestic equity benchmarks after exit poll results predicted a firm comeback of the ruling BJP-led government for the third straight term. Traders got support after India's gross domestic product (GDP) grew 7.8 per cent y-o-y during the January-March 2024 quarter (Q4 FY24) as compared to 7 per cent growth recorded a year ago. For the full financial year 2023-24, India's GDP growth rate stood at 8.2 per cent as against 7 per cent in FY23. Investors overlooked reports that India's manufacturing sector growth eased further in the month of May, signaling a slower but still substantial improvement in the health of the sector. On the global front, pound eased broadly on Monday, as investors took profit on sterling's best monthly performance against the dollar this year in May and awaited key events and data globally this week. Finally, the rupee ended at 83.15 (Provisional), stronger by 27 paise from its previous close of 83.42 on Friday.

The FIIs as per Monday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 96154.75 crore against gross selling of Rs 93977.09 crore, while in the debt segment, the gross purchase was of Rs 1035.92 crore with gross sales of Rs 1697.38 crore. Besides, in the hybrid segment, the gross buying was of Rs 95.28 crore against gross selling of Rs 133.03 crore.

The US markets ended mostly higher on Monday with marginal gains as weaker-than-expected manufacturing numbers sparked debate over likely Fed rate cut bets. Asian markets are trading mostly lower on Tuesday following the mixed cues from Wall Street overnight, with weakness across most sectors led by Index heavyweights and technology stocks. Indian markets clocked their biggest one-day rally and ended with gains of over 3% each on Monday as exit polls for the 2024 Lok Sabha elections suggesting a comfortable majority for the BJP-led NDA. Today, markets are likely to continue the previous session's rally with optimistic start amid anticipation surrounding the Lok Sabha 2024 election results. Vote counting begins at 8 am and a clear trend should emerge by noon. A summary of exit polls project the NDA could win between 355 and 380 seats in the 543-member lower house of parliament. Also, a sharp fall in crude oil prices overnight likely to support Indian markets. Foreign fund inflows likely to aid domestic sentiments. After having net sold stocks to the tune of Rs 42,200 crore in the month of May, foreign institutional investors (FIIs) net bought shares worth Rs 6,851 crore on Monday, in the first trading session of June. Some support will come with a private report that strong growth and a narrower fiscal deficit can lead to a sovereign rating upgrade for India. it said the government's commitments on fiscal deficit to 5.1 per cent in FY25 and further down to 4.5 per cent in FY26 look more credible now, and pointed out that the number came in at 5.6 per cent in FY24 as against the budgeted 5.8 per cent. However, there may be some cautiousness as S&P Global Market Intelligence asserts that weak private consumption in India remains the largest concern, with rural demand in particular still straggling to catch up, at a time when the country's overall growth remains strong. For the second consecutive quarter, India's real GDP growth exceeded most forecasts, bringing the full financial year 2023-24 growth to 8.2 per cent. With this, India maintains its status of the world's fastest-growing large economy. Meanwhile, the capital markets regulator Sebi introduced a mobile app designed to demystify personal finance for investors with a suite of comprehensive tools. Coal industry stocks will be in focus as the Coal Ministry's provisional data showed that the country's coal production rose by 10.15 per cent to 83.91 million tonnes (MT) in May compared to 76.18 MT in the year-ago period. As per the data, coal production by state-owned CIL rose by 7.46 per cent to 64.40 MT in May compared to 59.93 MT in the year-ago period. There will be some reaction in port and shipping industry stocks with report that cargo traffic across 12 major ports in the country increased by 3.75 per cent year-on-year in May to 72.04 million tones (MT) from 69.43 MT handled in the corresponding month of 2023 with nine such ports showing positive growth.

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

Index

Previous close

Support

Resistance

NSE Nifty

23,263.90

23,104.56

23,380.96

BSE Sensex

76,468.78

75,851.85

76,912.31

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

863.98

174.35

170.46

176.61

State Bank of India

642.69

909.05

873.20

928.45

Power Grid

552.19

338.00

326.16

349.26

NTPC

392.61

392.50

379.56

399.31

HDFC Bank

363.19

1573.00

1549.00

1598.00

  • Wipro has expanded retail-focused capabilities within Wipro VisionEDGE+.
  • NTPC has started Commercial Operations of the second and last part capacity of 33 MW out of 90 MW Anta Solar PV Project at Anta, Rajasthan.
  • Coal India has reported 7.51% rise in coal production to 64.4 million tonnes during May 2024 as compared to 59.9 million tonnes in May 2023.
  • Bajaj Finserv's subsidiary -- Bajaj Finserv Direct has launched its Technology Services business hub at the Dubai International Financial Centre as part of its foray into the Middle East market.

News Analysis