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Market Commentary 06 May 2024
Benchmarks likely to get positive start; Services PMI eyed

Indian equity benchmarks ended sharply lower on Friday amid selling pressure in key index heavyweights namely -- Larsen & Toubro, Maruti Suzuki and Nestle. Markets made a positive start as traders got support after the Organisation for Economic Co-operation and Development (OECD) raised its growth forecast for India by 40 basis points to 6.6 per cent for 2024-25, holding that buoyant public investment and improved business confidence are expected to propel India's gross domestic product (GDP) growth. Some support also came with a private report that the stock market reflects India's ascendance as an economic superpower with premium valuations, but challenges remain for inclusive growth. As per the report, over the past decade, India has steadily climbed the ranks of global economies, transitioning from the tenth to the fifth largest economy in the world. However, key gauges wiped out early gains and slipped into negative territory in morning deals, as traders turned cautious with provisional data from the NSE showing that foreign institutional investors (FIIs) net sold Rs 964.47 crore shares on May 2, 2024. Markets extended losses in afternoon deals, as sentiments remained down-beat with Reserve Bank data showing that India's services exports declined 1.3 per cent in March to $30 billion while imports fell by 2.1 per cent to $16.61 billion. As per RBI's data on India's international trade in services, the trade surplus during March 2024 was $13.4 billion. Meanwhile, economic think tank GTRI in its report said India's imports of electronics, telecom, and electrical products soared to $89.8 billion in 2023-24 and over half of these imports are sourced from China and Hong Kong. Finally, the BSE Sensex fell 732.96 points or 0.98% to 73,878.15 and the CNX Nifty was down by 172.35 points or 0.76% points to 22,475.85.

Magnifying their previous session's gains, the US markets ended significantly higher on Friday with the tech-heavy Nasdaq leading the charge. Rally on the Wall Street came following the release of a closely watched Labor Department showing employment in the U.S. increased by much less than expected in the month of April. The Labor Department said non-farm payroll employment climbed by 175,000 jobs in April after surging by an upwardly revised 315,000 jobs in March. Street had expected employment to jump by 243,000 jobs compared to the spike of 303,000 jobs originally reported for the previous month. The report also showed the unemployment rate crept up to 3.9 percent in April from 3.8 percent in March. The unemployment rate was expected to remain unchanged. The annual rate of wage growth slowed to 4.0 percent in April from 4.1 percent in March, while economists had expected the pace of wage growth to dip to 4.0 percent. The data helped generate optimism about the outlook for interest rates following the Federal Reserve's monetary policy meeting earlier in the week. Positive sentiment was also generated in reaction to earnings news from Apple (AAPL), with the tech giant surging by 6.0 percent. Apple rallied after reporting better than expected fiscal second quarter results and announcing a $110 billion stock repurchase. Meanwhile, a separate report released by the Institute for Supply Management (ISM) showed U.S. service sector activity unexpectedly contracted in the month of April. The ISM said its services PMI dipped to 49.4 in April from 51.4 in March, with a reading below 50 indicating contraction. Street had expected the index to inch up to 52.0. With the unexpected decrease, the services PMI indicated activity in the sector contracted for the first time since December 2022.

Crude oil futures ended sharply lower with losses of around a percent on Friday on weak U.S. jobs data, and concerns about the outlook for global oil demand. Data from the Labor Department showed non-farm payroll employment climbed by 175,000 jobs in April after surging by an upwardly revised 315,000 jobs in March. Meanwhile, a report from Baker Hughes said the number of oil and natural gas rigs count fell to lowest since January 2022, falling by eight to 605 in the week to May 3. The oil rig count fell by seven to 499 in the week. Benchmark crude oil futures for June delivery slipped $0.84 or about 1.06% to settle at $78.11 a barrel on the New York Mercantile Exchange. Brent crude for July delivery fell $0.71 or 0.85% to $82.96 per barrel on London's Intercontinental Exchange.

Indian rupee ended higher against the U.S. dollar on Friday tracking a weak American currency and retreating crude oil prices. Traders got support as the Organisation for Economic Co-operation and Development (OECD) raised its growth forecast for India by 40 basis points to 6.6 per cent for 2024-25, holding that buoyant public investment and improved business confidence are expected to propel India's gross domestic product (GDP) growth. Investors overlooked Reserve Bank's data showing that India's services exports declined 1.3 per cent in March to $30 billion while imports fell by 2.1 per cent to $16.61 billion. As per RBI's data on India's international trade in services, the trade surplus during March 2024 was $13.4 billion. On the global front, yen rose in Asian trade on Friday against major rivals, extending gains for the third straight session against the dollar. Finally, the rupee ended at 83.45 (Provisional), up by 1 paisa from its previous close of 83.46 on Thursday.

The FIIs as per Friday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 17121.48 crore against gross selling of Rs 17816.48 crore, while in the debt segment, the gross purchase was of Rs 680.82 crore with gross sales of Rs 2139.40 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.96 crore against gross selling of Rs 14.94 crore.

The US markets ended higher on Friday as a softer-than-expected employment report bolstered the case for rate cuts from the Federal Reserve while also providing evidence of U.S. economic resilience. Asian markets are trading mixed on Monday as traders await China's return from holiday, with mainland markets expected to rise due to supportive policies from Beijing. Meanwhile, markets in Japan and South Korea are closed. Indian markets ended lower on Friday as investors pared exposure to telecom, capital goods and tech stocks despite largely positive cues from Asian counterparts. Today, markets are likely to get positive start tracking Friday's overnight gains on Wall Street. Investors will be eyeing the Services PMI data to be out later in the day. Some support will come as data from National Securities Depository (NSDL) showed that foreign portfolio investors (FPIs) have again returned as net buyers in the Indian stock market in May. Till May 3, they bought equities worth Rs 1,156 crore in India. In April, FPIs turned net sellers in Indian stocks, as the ongoing geopolitical crisis in the Middle East then likely pushed investors to take money off their portfolios. Traders may take note of report that Defence Minister Rajnath Singh in first clear remarks reflecting forward movement in the mega reform initiative said the theaterisation process in the military is making progress as consensus is emerging among the three services on the ambitious initiative. Singh said the talks between India and China are going on well for the resolution of the eastern Ladakh border row and hoped that a solution to the standoff will be found. However, there may some cautiousness as the Reserve Bank of India (RBI) said India's forex reserves dropped $2.412 billion to $637.922 billion as on April 26, in the third consecutive weekly decline in the reserves. In the previous reporting week, the overall reserves had declined $2.28 billion to $640.33 billion. There will be some buzz in the telecom stocks as the Telecom Regulatory Authority of India (Trai) report showed that telecom subscriber base in the country grew marginally to 119.9 crore in March due to new additions by Reliance Jio and Bharti Airtel. As per the data, the broadband subscriber base rose to 92.4 crore. Banking stocks will be in focus as the Reserve Bank of India's weekly statistical supplement showed Indian banks' loans rose 19% in the two weeks to April 19 from a year earlier, while deposits rose 13.3%. As per the data, outstanding loans fell Rs 98,700 crore ($11.84 billion) to Rs 16,400,000 crore in the two weeks to April 19.

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

Index

Previous close

Support

Resistance

NSE Nifty

22,475.85

22,284.36

22,731.01

BSE Sensex

73,878.15

73,198.86

74,826.31

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

625.74

166.50

164.19

169.79

Coal India

510.72

475.50

458.00

484.40

ONGC

289.13

286.10

282.41

291.36

Power Grid

270.74

310.40

307.06

314.91

NTPC

268.45

364.05

356.14

376.19

  • Coal India has reported 25.78% rise in its consolidated net profit at Rs 8640.45 crore for fourth quarter ended March 31, 2024 as compared to Rs 6869.46 crore for the same quarter in the previous year.
  • Wipro has been selected by Independent Health, Western New York's only 5-Star Rated Medicare Advantage Plan, to implement Wipro's Medicare Prescription Payment Plan platform for the upcoming open enrollment period.
  • Mahindra & Mahindra has received a record 674 patents in FY24, the most of any Indian 4-wheeler automobile/farm equipment manufacturer.
  • Dr. Reddy's Laboratories has launched Doxycycline Capsules, 40 mg in the U.S. market, a therapeutic generic equivalent of ORACEA (doxycycline, USP) Capsules, 40 mg approved by the USFDA.

News Analysis