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NSE Intra-day chart (06 December 2022)
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Market Commentary 07 December 2022
Markets to get pessimistic start ahead of RBI policy meeting outcome


Indian benchmark indices ended in negative territory on Tuesday amid weak global market trends and rising crude prices. Key gauges made weak start and stayed in red during the whole session, as market participants turned cautious ahead of the outcome of Reserve Bank of India's (RBI) monetary policy decision due on Wednesday. Some concern also came with exchange data showing that Foreign Institutional Investors (FIIs) offloaded shares worth Rs 1,139.07 crore on Monday. Traders failed to take any sense of relief with a private report stating that India's central bank will probably start slowing the pace of interest-rate increases on Wednesday, signaling it's near the end of its aggressive tightening cycle. Sentiments remained down-beat in late afternoon deals, after World Bank's India Development Update said India is affected by spillovers from the US, Euro area and China. It however saw the government meeting the fiscal deficit target of 6.4 percent of the GDP in 2022-23. Besides, World Bank expects the inflation at 7.1 percent in current fiscal year. Moreover, World Bank revised upwards its GDP growth forecast for India to 6.9 per cent for 2022-23, saying the economy was showing higher resilience to global shocks. In October, it had cut India's GDP growth forecast to 6.5 per cent from 7.5 per cent earlier. Now, it has upgraded the projection to 6.9 per cent for 2022-23 (April 2022 -March 2023). However, key gauges managed to trim some losses towards the end as traders got some relief with Union Minister of Agriculture and Farmers Welfare, Narendra Singh Tomar's statement that the Government of India is continuously working efficiently under the leadership of Prime Minister, with an aim to solve challenges of the agriculture sector. Meanwhile, the GST Council in its next meeting is likely to discuss decriminalisation of offences under GST law, along with raising the threshold of launching prosecution to Rs 20 crore, from Rs 5 crore at present. Finally, the BSE Sensex fell 208.24 points or 0.33% to 62,626.36 and the CNX Nifty was down by 58.30 points or 0.31% to 18,642.75.


The US markets ended lower on Tuesday, extending the sell-off seen over the course of Monday's session, on lingering concerns about the outlook for interest rates ahead of next week's Federal Reserve meeting. Recent upbeat economic data has raised concerns about how much further the central bank will raise rates at future meetings. Cautiousness also prevailed in the markets as the Commerce Department released a report showing the US trade deficit widened in the month of October. The report said the trade deficit widened to $78.2 billion in October from a revised $74.1 billion in September. Street had expected the trade deficit to increase to $79.1 billion from the $73.3 billion originally reported for the previous month. The wider trade deficit came as the value of exports slid by 0.7 percent to $256.6 billion, while the value of imports climbed by 0.6 percent to $334.8 billion. On the sectoral front, oil stocks moved sharply lower over the course of the session, with another steep drop by the price of crude oil weighing the sector. With crude for January delivery plunging $2.68 to $74.25 a barrel, the NYSE Arca Oil Index tumbled by 2.6 percent to its lowest closing level in well over a month. Substantial weakness was also visible among semiconductor stocks, as reflected by the 2.4 percent nosedive by the Philadelphia Semiconductor Index. Networking stocks also showed a significant move to the downside, dragging the NYSE Arca Networking Index down 2.0 percent.


Crude oil futures ended sharply lower on Tuesday, magnifying their previous session's losses, as growing concerns about global demand. Data showing Chinese service-sector activity to have slipped to a six-month low hurt oil prices. Oil prices fell despite a price cap on Russian oil sales as uncertainty and consequences of a continued Fed tightening weighed on the commodity. The European Union officially stopped importing oil directly from Russia since Monday. Meanwhile, price cap of $60 per barrel on Russian crude has also come into effect. Benchmark crude oil futures for January delivery fell $2.68 or 3.5 percent at $74.25 a barrel on the New York Mercantile Exchange. Brent crude for February delivery dropped $3.12 or 3.75 percent to settle at $79.56 (Provisional) a barrel on London's Intercontinental Exchange.


Rupee ended weaker against dollar on Tuesday on account of continued dollar demand from importers and banks. Traders were worried ahead of RBI Monetary Policy Committee meeting outcome. Besides, World Bank's India Development Update said India is affected by spillovers from the US, Euro area and China. It however saw the government meeting the fiscal deficit target of 6.4 percent of the GDP in 2022-23. Meanwhile, World Bank expects the inflation at 7.1 percent in current fiscal year. On the global front, U.S. dollar index held firm on Tuesday, following its biggest rally in two weeks after strong services data in the United States fuelled expectations for higher interest rates from the Federal Reserve than recently projected. Finally, the rupee ended at 82.61 (Provisional), weaker by 76 paise from its previous close of 81.85 on Monday.


The FIIs as per Tuesday's data were net sellers in equity segment, while net buyers in debt segment. In equity segment, the gross buying was of Rs 8861.40 crore against gross selling of Rs 9755.43 crore, while in the debt segment, the gross purchase was of Rs 375.89 crore against gross selling of Rs 227.52 crore. Besides, in the hybrid segment, the gross buying was of Rs 11.08 crore against gross selling of Rs 6.71 crore.


The US markets ended lower on Tuesday as signs of a resilient economy cast doubt on the Fed easing rate hikes. Asian markets are trading mostly in red on Wednesday as top executives from the biggest U.S. banks warned that stubbornly high inflation could trigger a U.S. economic recession next year. Indian markets ended lower on Tuesday on foreign fund outflows as upbeat U.S. jobs and service sector data rekindled fears of aggressive Fed rate hikes. Today, markets are likely to get pessimistic start on weak global cues and as investors look ahead to the Reserve Bank of India's monetary policy announcement later in the day. There are expectations that the RBI MPC is set to announce further repo rate hikes amid elevated inflation, geopolitical tensions, and fears of a global recession, on Wednesday, December 7, once the three-day review session has concluded. However, traders may take encouragement as the World Bank in its India Development Update said the central government is on track to meet its fiscal deficit target of 6.4 per cent of the GDP for 2022-23 on the back of strong growth in revenue collections. It said high nominal GDP growth in the first quarter supported strong growth in revenue collection, especially Goods and Services Tax (GST), despite tax cuts on fuel. Besides, Fitch Ratings has retained India's economic growth forecast at 7 per cent for the current fiscal, saying India could be one of the fastest-growing emerging markets this year. Some support may come with a private report that amid restrictions in view of the Covid-19 pandemic in China, India seems to be emerging as a key investment destination for multinational corporations. There will be some buzz in port industry stocks as Indian Ports' Association (IPA) data showed state-owned ports handled 1.9 million tonnes (mt) of cargo in November, or just about 3 per cent more than last year, as international trade volatility and freight costs continued to dampen traffic at these ports. Power stocks will be in focus as India's thermal power generation registered a growth of 16.28 per cent at 87,687 MU (million units) in November this year as compared to 75,412 MU generated in the corresponding month of previous fiscal. There will be some reaction in cement industry stocks with a private report that the price of cement is hardening across the country and since August this year, the rates have gone up by Rs 16/per bag. According to a report, in November the prices went up by about Rs 6-7/bag.


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