Indian equity benchmarks closed in the red for the second consecutive day on Thursday dragged down by banking and finance counters.  Key gauges opened positive but soon went in negative territory amid continuous foreign fund outflows. Foreign Institutional Investors (FIIs) offloaded shares worth a net Rs 2,620.89 crore on January 4, 2023, according to exchange data. Some concerns came with rating agency ICRA's report stating that the evolving global macroeconomic headwinds could moderate growth for Indian IT services industry over the medium term. It has cited that given the Indian IT services industry generates about 60-65 per cent of revenues from the US market and 20-25 per cent from the European market, it remains susceptible to macroeconomic uncertainties and adverse regulatory changes in these key operating markets. However, in the last hour of the trade, renewed buying across Oil & Gas, FMCG and Energy stocks helped the benchmarks to pare around half of the intraday losses. Traders took some support with a report that private sector banks are expected to report healthy growth in earnings during the October-December quarter of FY23. This would be aided by robust credit growth, margin expansion, benign credit costs, and lower provisioning burden. However, operational costs may remain high due to investment in businesses. Traders took a note of Bibek Debroy's statement, chairman of Economic Advisory Council to the Prime Minister, that India's GDP will be close to $20 trillion by 2047 and per capita income may reach $10,000 (at current value of USD). Finally, the BSE Sensex fell 304.18 points or 0.50% to 60,353.27 and the CNX Nifty was down by 50.80 points or 0.28% to 17,992.15.

The US markets ended lower on Thursday, with Nasdaq settling cut of over one and half percent, as strong labor data and hawkish Fed commentary signaled more aggressive Federal Reserve interest-rate hikes to come. Payroll processor ADP showed private sector employment in the U.S. jumped by much more than expected in the month of December. ADP said private sector employment shot up by 235,000 jobs in December after surging by an upwardly revised 182,000 jobs in November. Street had expected employment to jump by about 150,000 jobs compared to the addition of 127,000 jobs originally reported for the previous month. Traders worry continued labor market tightness could encourage the Federal Reserve to continue aggressively raising interest rates in the coming months. On Friday, the Labor Department is scheduled to release its more closely watched employment report for the month of December. On the sectoral front, Software stocks turned in some of the worst performances on the day, with the Dow Jones U.S. Software Index tumbling by 3.2 percent to a nearly two-month closing low. Interest rate-sensitive commercial real estate and utilities stocks also saw considerable weakness, dragging the Dow Jones U.S. Real Estate Index and the Dow Jones Utility Average down by 2.7 percent and 2.1 percent, respectively. Chemical stocks also showed a significant move to the downside, resulting in a 2.2 percent slump by the S&P Chemical Sector Index. Semiconductor, transportation and banking stocks also saw notable weakness, while energy, steel and airline stocks bucked the downtrend.

Crude oil futures ended higher on Thursday after data showed gasoline and distillate stockpiles dropped in the week ended December 30th. The Energy Information Administration (EIA) data showed gasoline stocks in the U.S. dropped by 346,000 barrels last week, compared with an expected drop of 486,000 barrels. Meanwhile, distillate stockpiles fell 1.4 million barrels in the week versus expectations for a drop of 396,000 barrels. However, EIA data showed Crude inventories in the U.S. rose by 1.7 million barrels last week versus an expected increase of 1.2 million barrels. Benchmark crude oil futures for February delivery rose $0.83 or 1.1 percent at $73.67 a barrel on the New York Mercantile Exchange. Brent crude for March delivery gained $0.94 or 1.2 percent at $78.78 a barrel (provisional) on London's Intercontinental Exchange.

Rupee settled higher against dollar on Thursday, supported by a weaker greenback overseas and decline in crude oil prices. Traders overlooked rating agency ICRA's report stating that the evolving global macroeconomic headwinds could moderate growth for Indian IT services industry over the medium term. It has cited that given the Indian IT services industry generates about 60-65 per cent of revenues from the US market and 20-25 per cent from the European market, it remains susceptible to macroeconomic uncertainties and adverse regulatory changes in these key operating markets. On the global front, dollar was roughly flat in choppy trade on Thursday after the release of the latest Federal Reserve minutes. Details of the discussion from the central bank's December policy meeting, released on Wednesday, showed policymakers remain focused on curbing inflation and do not envisage interest rate cuts in 2023. Finally, the rupee ended at 82.50 (Provisional), stronger by 32 paise from its previous close of 82.82 on Wednesday.

The FIIs as per Thursday's data were net sellers in both equity and debt segment. In equity segment, the gross buying was of Rs 4512.26 crore against gross selling of Rs 6973.37 crore, while in the debt segment, the gross purchase was of Rs 135.96 crore against gross selling of Rs 569.41 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.59 crore against gross selling of Rs 9.18 crore.

The US markets ended lower on Thursday as evidence of a tight labor market eroded hopes that the Federal Reserve could pause its rating hiking cycle anytime soon as it keeps focused on inflation. Asian markets are trading mixed on Friday as a better-than-expected reading of ADP private payrolls report showed that employers added 235,000 jobs in December, showing a strong labor market. Indian benchmarks buckled under selling pressure for the second straight session on Thursday as traders reduced their exposure to riskier assets after minutes from the US Federal Reserve's latest meeting indicated more rate hikes this year. Today, the markets are likely to get cautious start amid mixed global cues. Investors may remained on sidelines and avoid taking long positions ahead of kick start of earning season in coming week. Persistent selling by foreign investors likely to dent sentiments in local markets. Foreign institutional investors (FII) sold shares worth Rs 1,449.45 crore on January 5, as per provisional data available on the NSE. Traders will be concerned with a private report that India's economy is expected to grow 5.5% in the next financial year, a notch below the expected potential rate of 6%, as growth momentum in the country was slowing gradually. However, some respite may come later in the day as the commerce and industry ministry is hopeful of improvement in foreign direct investment (FDI) inflows in the coming months despite global headwinds. Some support may come as Union New and Renewable Energy Minister R K Singh said his ministry will come out with detailed guidelines and standards for making India a global hub for hydrogen manufacturing. Traders may take note of report that Israel's newly-appointed Foreign Minister Eli Cohen and his Indian counterpart S Jaishankar have discussed about ways to strengthen bilateral ties, including ways to promote Free Trade Agreement (FTA) and projects in the field of innovation, food and water security. Meanwhile, the Securities and Exchange Board of India (Sebi) has extended the relaxation to listed companies from dispatching of physical copies of financial statements till September 30, 2023. Coal industry stocks will be in focus as the dispatch of coal to different sectors was at 78.91 million tonnes (MT) in December, registering a rise of 5.28 per cent. The coal dispatch in the corresponding month of previous fiscal was 74.95 MT.

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

Nifty Top volumes

• Coal India and the four central trade unions -- BMS, HMS, AITUC and CITU have signed a MoU recommending 19% MGB to its 2.38 lakh non-executive employees as part of the ongoing National Coal Wage Agreement. 
• Bajaj Finance's deposits book stood at around Rs 43,000 crore (provisional) as of December 31, 2022 as compared to Rs 30,481 crore as of December 31, 2021, a YoY growth of 41%. 
• Reliance Industries' telecom arm -- Reliance Jio Infocomm has collaborated with Motorola to enable True 5G across its extensive 5G smartphone portfolio in India. 
• IndusInd Bank, British Airways Executive Club and Qatar Airways Privilege Club have entered into a partnership to introduce the unique multi-branded credit card, with two leading international airlines, powered by Visa.