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Market Commentary 06 June 2024
Benchmarks likely to get positive start tracking firm global cues

Indian equity benchmarks exhibited a spirited recovery after suffering heavy losses in the previous session and ended higher by over three percent on Wednesday, driven by broad based buying across various sectors, as political stability appears assured. However, attention will remain on the formation of the government and the forthcoming RBI policy meeting.  Markets made an optimistic start but soon tuned volatile amid foreign fund outflows. A huge selling was seen from foreign institutional investors (FIIs) on June 4 as they sold Indian equities worth Rs 12,436.22 crore. But recovery in heavyweight stocks helped indices gradually climb higher throughout the day. Traders took encouragement with a private report that India's world record beating economic growth rate together with robust tax revenues, a fast expanding digital and financial infrastructure and a strong manufacturing sector will give the new government a base for unleashing next generation reforms that may make the country a developed nation by 2047. Sentiments remained up-beat in late afternoon deals, as a private report stated that India's economic fundamentals remain robust, after the results of the country's general elections paved the way for Prime Minister Narendra Modi's third consecutive term in office. The Election Commission of India has declared results for all 543 Lok Sabha constituencies, with the BJP winning 240 seats and the Congress 99. Traders overlooked private survey showing that growth in India's services activity slowed to a five-month low in May as robust domestic demand weakened. The final HSBC India Services purchasing managers' index, compiled by S&P Global, fell to 60.2 in May 2024 from April's 60.8, confounding a preliminary reading for a rise to 61.4. However, it remained above the 50 mark separating growth from contraction for the 34th straight month. Finally, the BSE Sensex rose 2303.19 points or 3.20% to 74,382.24, and the CNX Nifty was up by 735.85 points or 3.36% points to 22,620.35.

The US markets ended higher on Wednesday, with the Nasdaq and the S&P 500 reaching new record closing highs. The surge by the Nasdaq came as tech stocks continued to take their cues from Nvidia (NVDA), as the AI darling soared by 5.2 percent to a new record closing high.Last month, Nvidia announced a ten-for-one stock split, with holders of the company's common stock as of the close of trading on Thursday set receive nine additional shares. The advance by Nvidia contributed to strength in the broader semiconductor sector, resulting in a 4.5 percent spike by the Philadelphia Semiconductor Index. Semiconductor equipment manufacturers Applied Materials (AMAT) and KLA Corp. (KLAC) also posted standout gains after Barclays upgraded its rating on the stocks to Equal-Weight from Underweight. Computer hardware stocks are also saw substantial strength on the day, driving the NYSE Arca Computer Hardware Index up by 3.4 percent. Some support also came as a report from payroll processor ADP showing private sector job growth in the U.S. slowed by more than expected in the month of May added to optimism about the outlook for interest rates. ADP said private sector employment climbed by 152,000 jobs in May after jumping by a downwardly revised 188,000 jobs in April. Street had expected private sector employment to increase by 173,000 jobs compared to the addition of 192,000 jobs originally reported for the previous month. Meanwhile, traders largely shrugged off a separate report from the Institute for Supply Management showing service sector activity returned to growth in the month of May after contracting in April for the first time since December 2022 The ISM said its services PMI jumped to 53.8 in May from 49.4 in April, with a reading above 50 indicating growth in the sector. Street had expected the index to inch up to 50.8. With the much bigger than expected increase, the services PMI reached its highest level since hitting 54.1 in August 2023.

Crude oil futures ended higher on Wednesday bouncing back from four-month lows after a decision by OPEC+ to increase production triggered a selloff this week. Oil prices were down nearly 4% this week after eight OPEC+ members agreed Sunday to gradually phase out 2.2 million barrels per day in production cuts. Meanwhile, optimism about the outlook for interest rates may have contributed to the turnaround by crude oil, as data showed signs of weakness in the labor market. Traders largely shrugged off a report from the Energy Information Administration showing crude oil inventories unexpectedly rebounded in the week ended May 31st. The report said crude oil inventories rose by 1.2 million barrels last week after tumbling by 4.2 million barrels in the previous week. Benchmark crude oil futures for July delivery surged 82 cents or 1.12% to settle at $74.07 a barrel on the New York Mercantile Exchange. Brent crude for August delivery was up 89 cents or 1.15% to $78.41 per barrel on London's Intercontinental Exchange.

Indian rupee appreciated against the dollar on Wednesday tracking strong buying in domestic equities and lower crude oil prices in international markets. Sentiments were optimistic as a private report stated that India's economic fundamentals remain robust, after the results of the country's general elections paved the way for Prime Minister Narendra Modi's third consecutive term in office. Traders overlooked report that India's services sector activity growth eased further during the month of May but remained comfortably above the neutral mark of 50.0, highlighting a sharp upturn in output. According to the survey report, the seasonally adjusted HSBC India Services PMI Business Activity Index fell to 60.2 in May from 60.8 in April. It was 61.2 in March. On the global front, the dollar steadied on Wednesday as traders pared back on riskier bets in emerging markets while waiting on an interest rate decision in Canada and on U.S. services data. Finally, the rupee ended at 83.44 (Provisional), stronger by 7 paise from its previous close of 83.51 on Tuesday.

The FIIs as per Wednesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 26735.75 crore against gross selling of Rs 38979.66 crore, while in the debt segment, the gross purchase was of Rs 2985.73 crore with gross sales of Rs 2123.35 crore. Besides, in the hybrid segment, the gross buying was of Rs 26.20 crore against gross selling of Rs 40.54 crore.

The US markets settled in green terrain on Wednesday amid rising hopes of Fed rate cut post subdued jobs data. Asian markets are trading mostly higher on Thursday optimism prevailed as hopes for a cut in the euro rate boosted investor confidence. Indian markets staged a smart rebound and ended with notable gains on Wednesday as investors assessed increased prospects of the Bharatiya Janata Party (BJP)-led NDA forming the next government. Today, the markets are likely to get positive start tracking firm global cues with overnight gains on Wall Street as well as broadly positive cues from Asian counterparts. Some optimism will come as India Ratings and Research (Ind-Ra) projects that India's current account balance (CAB) will achieve a surplus of approximately $6 billion (0.6 per cent of GDP) in the fourth quarter of the fiscal year 2024 (Q4FY24). This marks the first surplus since the first quarter of fiscal year 2022 (1QFY22), a significant turnaround from the previous quarter's deficit of $10.5 billion (1.2 per cent of GDP). Besides, a day after the 18th Lok Sabha elections delivered a surprising outcome, Fitch Ratings reinforced its positive outlook on India's medium-term economic growth. Once again, this outlook has been supported by substantial government capital expenditure and strengthened corporate and bank balance sheets. Meanwhile, the Securities and Exchange Board of India (Sebi) has relaxed the timeline for foreign portfolio investors (FPIs) for reporting and disclosing material changes. The regulator has also notified norms for FPIs whose registration has lapsed to liquidate their holdings in the domestic market. However, there may be some cautiousness amid foreign fund outflows. Foreign institutional investors (FIIs) remained heavy sellers for the second straight trading yesterday. FIIs net sold stocks worth Rs 5,656 crore on June 05. Aviation industry stocks will be in focus with a private report that India's domestic air traffic is expected to rise 6 to 8 per cent to 161 to 164 million in the current financial year. The report said international air traffic is projected to jump 9-11 per cent to 75 to 78 million in the fiscal ending March 2025. Besides, Aviation Secretary Vumlunmang Vualnam has expressed the government's unwavering confidence in the continued development of airport infrastructure across India. There will be some reaction in metal sector stocks as Icra revised its projection for domestic steel demand growth to 9-10% for the fiscal year 2025, citing robust government spending and strong demand from steel-consuming sectors. The agency noted a growth of 11.3% in domestic steel consumption between February and April 2024.

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

Index

Previous close

Support

Resistance

NSE Nifty

22,620.35

22,051.40

22,929.85

BSE Sensex

74,382.24

72,662.84

75,318.22

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

State Bank of India

742.56

787.55

756.06

807.01

Tata Steel

600.99

169.00

162.14

172.74

NTPC

464.19

341.80

323.99

350.94

Power Grid

453.13

298.50

284.79

306.64

ICICI Bank

421.72

1102.95

1061.59

1133.79

  • LTIMindtree has expanded its partnership with SAP, a leading provider of enterprise application software, to deliver innovations for complex manufacturing industries.
  • Hindalco Industries' wholly owned subsidiary -- Novelis Inc. has postponed its initial public offering due to market conditions.
  • Tata Motors' step down wholly owned subsidiary -- Tata Motors Finance has received approval to merge with Tata Capital through an NCLT scheme of arrangement.
  • Maruti Suzuki India is all set to invest Rs 450 crore over a span of three years towards commissioning renewable energy projects linked to solar power and biogas.

News Analysis