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Market Commentary 07 November 2022
Benchmarks likely to make positive start on firm global cues

 

In the volatile session, Indian equity benchmarks managed to end in green on Friday, helped by continuous buying from foreign institutional investors and a largely positive trend in Asian and European markets. Indian equities made a cautious start and remained volatile for whole day as traders were worried after Bank of England raised interest rates to 3% on Thursday from 2.25%, its biggest rate rise since 1989 as it warned of a very challenging outlook for the economy. The central bank forecasts inflation will hit a 40-year high of around 11% during the current quarter, but that Britain has already entered a recession that could potentially last two years - longer than during the 2008-09 financial crisis.   However, fag-end buying helped the markets to end higher. Traders got support as Finance Minister Nirmala Sitharaman said India offers policy stability, transparency and consultative process of governance to incubate investment. Some support also come in as Prime Minister Narendra Modi said loans worth Rs 20 lakh crore have been disbursed so far under the Centre's MUDRA scheme to provide self-employment opportunities to the youth, and added that Maharashtra was one of its major beneficiaries. Meanwhile, the Reserve Bank's rate setting panel met on Thursday to discuss and draft a report for the government on why it failed to keep retail inflation below the target of 6 per cent for three consecutive quarters since January this year. Finally, the BSE Sensex rose 113.95 points or 0.19% to 60,950.36 and the CNX Nifty was up by 64.45 points or 0.36% to 18,117.15.

 

The US markets ended higher with gains of over one percent on Friday following the release of the Labor Department's closely watched monthly employment report for October. The report showed non-farm payroll employment jumped by 261,000 jobs in October after surging by an upwardly revised 315,000 jobs in September. Street had expected employment to climb by about 200,000 jobs compared to the addition of 263,000 jobs originally reported for the previous month. Meanwhile, the Labor Department said the unemployment rate rose to 3.7 percent in October from 3.5 percent in September. The unemployment rate was expected to inch up to 3.6 percent. The report generated a mixed reaction among traders, creating uncertainty about the outlook for future interest rate hikes. On the sectoral front, Gold stocks skyrocketed on the day, resulting in a 10.3 percent surge by the NYSE Arca Gold Bugs Index. The index bounced off its lowest closing level in a month. The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for December delivery soaring $45.70 to $1,676.60 an ounce. Substantial strength was also visible among steel stocks, as reflected by the 7.8 percent spike by the NYSE Arca Steel Index. With the jump, the index reached a two-month closing high. Computer hardware stocks also saw considerable strength on the day, driving the NYSE Arca Computer Hardware Index up by 4.0 percent.

 

Crude oil futures ended sharply higher on Friday amid easing concerns about the outlook for energy demand on reports China is likely to ease Covid-19 curbs imposed in several parts of the country. Further, a weak dollar, and fears of a likely ban by the European Union on Russian oil contributed as well to the surge in crude oil prices. Meanwhile, Richmond Federal Reserve President Thomas Barkin said he is ready to act more deliberatively on consideration of the pace of future US interest rate hikes, but said rates could continue rising for longer and to a higher end point than previously expected. Benchmark crude oil futures for December delivery rose $4.44 or about 5 percent at $92.61 a barrel on the New York Mercantile Exchange. Brent crude for January delivery surged $4.03 or about 4.26 percent to settle at $98.70 (Provisional) a barrel on London's Intercontinental Exchange.    

 

Indian rupee ended significantly higher against dollar on Friday as the American currency eased from its elevated levels. Local currency got support after Finance Minister Nirmala Sitharaman said India offers policy stability, transparency and consultative process of governance to incubate investment. Further, some support also come in as Prime Minister Narendra Modi said loans worth Rs 20 lakh crore have been disbursed so far under the Centre's MUDRA scheme to provide self-employment opportunities to the youth, and added that Maharashtra was one of its major beneficiaries. Moreover, some support came with Union Minister of Agriculture and Farmers Welfare, Narendra Singh Tomar's statement that India is moving towards positive changes. He also said the current scenario of India has changed, within the country and at the world level. Today we have the capability of making our nation strong in every respect. On the global front, Sterling rose on Friday but was still set for its largest weekly decline in six weeks after losing 2% following the Bank of England's (BoE) biggest interest rate hike in three decades. Finally, the rupee ended at 82.41 (Provisional), stronger by 47 paisa from its previous close of 82.88 on Thursday.

 

The FIIs as per Friday's data were net buyers in equity and debt segment.  In equity segment, the gross buying was of Rs 18565.51 crore against gross selling of Rs 17787.10 crore, while in the debt segment, the gross purchase was of Rs 432.11 crore against gross selling of Rs 327.95 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.36 crore against gross selling of Rs 12.50 crore.

 

The US markets ended higher on Friday reclaiming positive territory in a volatile trading session. Asian markets were trading mostly in green on Monday as investors digest the latest US jobs report and look ahead to the midterm elections.  Buying in last leg of trade helped Indian equity markets to end higher on Friday. Today, markets are likely to make positive start on firm global cues. Traders may get some support as the former Vice-Chairman of NITI Aayog Arvind Panagariya has said India may log a growth rate of eight per cent of real Gross Domestic Product (GDP) in FY23.  Traders may take not of report that US Secretary of the Treasury Janet Yellen will visit India to participate in the US-India Economic and Financial Partnership on November 11 and discuss how the two countries can work together to deepen their economic ties. Meanwhile, Union Minister Piyush Goyal has directed officials to fastrack the clearance of patents filed by government-related bodies in a time-bound manner. However, some cautiousness may prevail later in the day as chief economic adviser -- V Anantha Nageswaran has said the country's external sector could face some anxious moments this financial year, as the proposed oil price cap on global crude could instead serve to raise those instead. The way the oil price cap is being discussed has encouraged oil and gas traders to stock up on volumes, creating unintended consequences. This could create additional pressure on India's balance of payments. Besides, Union Finance Minister Nirmala Sitharaman has said indiscriminate borrowing and spending by certain States on non-merit goods and expenditure is a matter of concern, and fiscal strength is a critical component for Atma Nirbhar Bharat. She stated the temptation to borrow beyond capacity would create inter-generational burden and affect fiscal soundness of the country.  There will be some buzz in sugar related stocks as the government, which has allowed export of six million tonnes of sugar till May 31 of the ongoing 2022-23 season, said that it might allow more export after periodic assessment of domestic production. The quarterly earnings season enters its last leg this week with prominent companies like Coal India, Life Insurance Corporation of India, One97 Communications Tata Motors and Zomato likely to unveil their financial results during the week.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

18,117.15

18,044.50

18,162.45

BSE Sensex

60,950.36

60,742.75

61,081.23

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

702.99

104.85

103.04

105.84

State Bank Of India

257.59

595.70

585.09

601.64

NTPC

148.81

177.10

175.80

178.95

Hindalco Industries

133.17

430.05

417.36

437.36

TATA MOTORS

122.77

424.90

419.20

428.30

 

  • Servotech Power Systems has bagged order worth Rs 46.20 crore from Bharat Petroleum Corporation (BPCL) for supplying and installing a series of EV Chargers.
  •  Maruti Suzuki India plans to invest over Rs 7,000 crore this year on various initiatives, including the construction work of its new plant in Haryana and new model launches.
  •  Tata Motors has hiked prices of its cars under passenger vehicle segment with effect from November 7.
  •  AdaniConneX, a joint venture between Adani Enterprises and EdgeConneX, has opened Chennai 1 hyperscale data center campus located at SIPCOT IT Park in Chennai.
News Analysis