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NSE Intra-day chart (06 July 2022)
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Market Commentary 07 July 2022
Benchmarks likely to make gap-up opening on firm global cues

 

Indian equity benchmarks ended near day's high point on Wednesday, led by strong gains in Auto, Consumer Discretionary and FMCG stocks amid positive opening in European stock markets.  After the initial uptick, the benchmarks gradually inched higher as the session progressed and settled around the day's high as foreign funds turning net buyers of domestic equities after a long gap. FIIs turned net buyers after remaining net sellers in the capital market for past many days, as they bought shares worth Rs 1,295.84 crore on Tuesday. Traders also took some solace with Tarun Bajaj, Revenue Secretary, Ministry of Finance, stating that simplification of Goods and Services Tax (GST) law, rationalisation of rates, and removal of tax inversion are among the priority for the government of India. He also said the government is looking forward to having lower rates on fewer products, with indirect taxes contributing 35-40 per cent of the tax revenue. Key gauges extended gains in second half of trading session, taking support from a private report stating that the Centre's production-linked incentive (PLI) scheme has the potential to add nearly 4 per cent to GDP in terms of incremental revenues. The PLI scheme aims to provide nearly Rs 2.4 lakh crore worth of incentives over the next five years, with the lion's share going to electronics, auto components, and pharma. Additional support also came with report stated that a rise in public investment in the production-linked incentive schemes (PLI) has resulted in a growth in hiring intent for July-September as 61 percent of companies surveyed said they are keen to hire more. Traders overlooked the Centre for Monitoring Indian Economy (CMIE) data showed the rate of unemployment in India rose to 7.8 per cent in June due to a sharp jump in unemployment in rural areas. Finally, the BSE Sensex rose 616.62 points or 1.16% to 53,750.97 and the CNX Nifty was up by 178.95 points or 1.13% to 15,989.80.

 

The US markets ended higher on Wednesday after the minutes from the Federal Reserve's latest monetary policy meeting showed the central bank was committed to bringing down inflation. The minutes said the members of the central bank said there would be another 50 or 75-basis point move in the July meeting. The minutes also said that the participants continued to anticipate that ongoing increases in the target range for the federal funds would be appropriate to achieve the monetary policy committee's objectives. Besides, Technology stocks had a good outing once again, extending gains from the previous session. Technology stocks Apple, Alphabet, Amazon, Cisco Systems and Meta Platforms moved higher. United Health, Walmart, P&G, Travelers Companies, Visa, Merck and J&J also ended on the positive side. However, Energy stocks drifted lower as energy prices pared early gains and fell into the red amid worries about outlook for energy demand. On the economic data front, Markit Economics said the S&P Global US Composite PMI was revised higher to 52.3 in June from a preliminary reading of 51.2, down from 53.6 in May. The S&P Global US Services PMI was revised higher to 52.7 in June from a preliminary score of 51.6, and down from 53.4 in May, pointing to the weakest rise in activity in six months.

 

Crude oil futures ended lower on Wednesday, magnifying their previous session's losses, on concerns about outlook for energy demand due to a surge in Covid-19 cases in China and fears over a possible recession.  Further, the dollar's continued strength amid expectations of a series of sharp interest rate hikes by the Federal Reserve weighed as well on oil prices. Benchmark crude oil futures for August delivery dropped $0.97 or 1 percent to settle at $98.53 a barrel on the New York Mercantile Exchange. Brent crude for September delivery fell $2.22 or 2.16 percent to settle at $100.55 (Provisional) a barrel on London's Intercontinental Exchange.

 

Reversing previous session drubbing, Indian rupee appreciated significantly against dollar on Wednesday, owing to dollar sale by exporters and banks and positive domestic equities. Some support came in as Reserve Bank of India (RBI) further liberalised norms to boost inflows of foreign exchange, including doubling the borrowing limit under the ECB route, amid the rupee falling against the US dollar. Additional support came as FII's stood as net buyers after a long time. Foreign institutional investors (FIIs) turned net buyers for the first time since May 30, buying shares worth Rs 1,295.84 crore on July 5, as per provisional data available on the NSE. On the global front, pound steadied on Wednesday against dollar as British Prime Minister Boris Johnson clung to power after key cabinet members quit unexpectedly. Finally, the rupee ended at 78.94 (provisional), stronger by 39 paisa from its previous close of 79.33 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 7404.04 crore against gross selling of Rs 5271.03 crore, while in the debt segment, the gross purchase was of Rs 551.45 crore against gross selling of Rs 314.32 crore. Besides, in the hybrid segment, the gross buying was of Rs 7.16 crore against gross selling of Rs 7.07 crore.

 

The US markets ended higher on Wednesday as investors digested the recent FOMC minutes, which recalled their tough stance on inflation. Asian markets are trading mostly in green on Thursday tracing overnight gains on Wall Street. Indian markets climbed to their highest closing levels in almost a month on Wednesday, backed by buying across most sectors as a slump in crude oil prices aided the sentiment on Dalal Street. Today, markets are likely to extend their previous session's rally with gap-up opening mirroring firm global cues. Traders will be taking encouragement as the Reserve Bank of India (RBI) announced a series of measures to attract foreign flows in a bid to protect the local currency amid depleting foreign exchange reserves. India's foreign exchange reserves have depleted by $38 billion to below $600 billion since the Russian invasion of Ukraine late February. Traders may take note of report that Finance ministry released the fourth instalment of revenue deficit grant of Rs 7,183 crore to 14 states for the current fiscal. Meanwhile, the commerce ministry has recommended imposition of anti-dumping duty on high-quality glass, used in construction, refrigeration, solar energy and other industries, from Bangladesh and Thailand to guard domestic players from cheap imports. However, traders may be concerned as foreign institutional investors (FIIs) turned net sellers, offloading shares worth Rs 330.13 crore on July 6, as per provisional data available on the NSE. There may be some cautiousness as the head of the International Monetary Fund (IMF) said the outlook for the global economy had darkened significantly since April and she could not rule out a possible global recession next year given the elevated risks. Edible oil industry stocks will be in focus with a private report that edible oil industry has assured the government of further reduction in retail prices by at least Rs 10-15 a litre in the next few weeks. The assurance was given during a meeting that the industry had with senior officials from the food ministry on various issues concerning the edible oil industry. There will be some reaction in textile industry stocks as the finance ministry extended the exemption of customs duty on raw cotton imports by a month till October 31. On April 14, the ministry had given exemption from the duty and Agriculture Infrastructure Development Cess (AIDC) till September 30, 2022, for import of cotton to lower prices in the domestic market. Coal industry stocks will be in limelight as the Ministry of Coal on Wednesday said that the coal production has gone up by 32.5 per cent approx in June this year and the coal based power generation too has increased in the same period registering growth of approximately 26 per cent.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

15,989.80

15,856.69

16,067.14

BSE Sensex

53,750.97

53,323.07

53,999.10

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Oil and Natural Gas Corporation

590.92

121.25

119.56

123.21

Hindalco Industries

223.17

341.75

332.26

346.76

ITC

182.92

289.30

286.40

291.10

NTPC

159.29

139.70

136.54

142.44

Power Grid Corporation of India

144.02

211.50

208.41

214.36

 

  • NTPC has reported 61 per cent growth in its coal output at 42.40 lakh metric tonnes in April-June quarter from 26.40 lakh metric tonnes in the same period a year ago.
  • Dr. Reddy's Laboratories' wholly owned subsidiary -- Aurigene Discovery Technologies has collaborated with US-based EQRx.
  • Bajaj Finance's deposit book stood at around Rs 34,100 crore as of June 30, 2022 as compared to Rs 27,972 crore as of June 30, 2021, a YoY growth of 22%.
  • Tata Steel's consolidated steel output remained flat at 7.66 million tonnes during the April-June quarter of the current financial year FY23.
News Analysis