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Market Commentary 08 January 2024
Benchmarks likely to get cautious start amid rising geopolitical crisis

Indian equity benchmarks made a second straight day of gains on Friday, shrugging off weak global cues. Headline indices opened higher and traded in green for most part of the day as provisional data from the NSE showed foreign institutional investors (FIIs) bought shares worth Rs 1,513.41 crore on January 4. Sentiments remained positive with the United Nations (UN) World Economic Situation and Prospects (WESP) 2024 report stating that India's Gross domestic product (GDP) growth is projected to remain strong at 6.2 per cent in 2024 mainly supported by resilient private consumption and strong public investment. It also said that GDP in South Asia is projected to increase by 5.2 per cent in 2024, driven by a robust expansion in India, which remains the fastest-growing large economy in the world. Some support came in with a private report that India is likely to project higher economic growth estimates of around 7% for the 2023/24 fiscal year ending in March, compared with earlier government forecasts when the National Statistical Office releases its first advance GDP estimates on Friday. However, markets gave up early gains to slip in red in late afternoon deals, as traders turned cautious with a private report that the JN.1 subvariant has become the dominant Covid-19 variant in India, accounting for more than 60% of the coronavirus cases in the country. As of Thursday, 511 cases of the subvariant JN.1 have been reported across the country. India recorded 760 new Covid-19 cases and two deaths, while the active caseload saw a slight dip to 4,423 from 4,440 on the previous day. Some concern also came with Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Rajesh Kumar Singh stating that India will have to eventually move to a lower customs duty regime and cannot continue to protect domestic manufacturers by citing infant industry argument. However, markets soon regained traction to end higher, taking support from data showing that India's services sector ended 2023 on a firm footing, with activity expanding at its fastest pace in three months in December on buoyant demand and an optimistic year-ahead outlook. The HSBC India Services Purchasing Managers' Index, compiled by S&P Global, rose sharply in December to 59.0 from November's one-year low of 56.9. Finally, the BSE Sensex rose 178.58 points or 0.25% to 72,026.15 and the CNX Nifty was up by 52.20 points or 0.24% to 21,710.80.

The US markets ended the volatile session in green with marginal gains on Friday as traders reacted to the release of some key U.S. economic data, including a closely watched Labor Department report showing stronger than expected job growth in December. Initially, the data raised concerns about the outlook for interest rates, however positive sentiment prevailed as traders digested the details of the report, which also showed notable downward revisions to job growth in October and November. The Labor Department said non-farm payroll employment surged by 216,000 jobs in December compared to street estimates for an increase of about 170,000 jobs. At the same time, the increases in employment in October and November were downwardly revised to 105,000 jobs and 173,000 jobs, respectively, reflecting a net downward revision of 71,000 jobs. The Institute for Supply Management also released a report showing a bigger than expected slowdown in the pace of U.S. service sector growth. The ISM said its services PMI fell to 50.6 in December from 52.7 in November. While a reading above 50 still indicates growth, street had expected the index to show a much more modest decrease to 52.6. The data also contributed to significant volatility in the bond markets, with the yield on the benchmark ten-year note bouncing back and forth across the unchanged line before closing above 4.0 percent for the first time in over four weeks. Meanwhile, traders remained on sidelines ahead of inflation data which is likely to be release in next week, as the Labor Department is scheduled to release separate reports on consumer and producer price inflation.

Crude oil futures recouped previous session's losses and ended significantly higher on Friday with gains of over one and half a percent amid ongoing fears of an escalation of the Israel-Hamas war into a broader regional conflict. Attacks by Yemen's Houthi rebels against merchant shipping in the Red Sea as well as a U.S. airstrike that killed top leader of an Iran-backed terrorist group in Iraq added to the concerns. Benchmark crude oil futures for February delivery surged by $1.62 or 2.2 percent to settle at $73.81 a barrel on the New York Mercantile Exchange. Brent crude for March delivery rose by $1.17 or 1.51 percent to settle at $78.76 a barrel on London's Intercontinental Exchange.

Indian rupee ended higher for third straight day against the US dollar on Friday, on persistent selling of dollars by banks and exporters. Sentiments remained positive with the United Nations World Economic Situation and Prospects 2024 report stating that India's GDP growth is projected to remain strong at 6.2% in 2024 mainly supported by resilient private consumption and strong public investment. Some support also came with data showing that India's services sector ended 2023 on a firm footing, with activity expanding at its fastest pace in three months in December on buoyant demand and an optimistic year-ahead outlook. The HSBC India Services Purchasing Managers' Index, compiled by S&P Global, rose sharply in December to 59.0 from November's one-year low of 56.9. On the global front, the dollar rose on Friday, heading for its steepest weekly rise since May as traders scaled back expectations of early U.S. interest rate cuts this year. Finally, the rupee ended at 83.15 (Provisional), stronger by 9 paise from its previous close of 83.24 on Thursday.

The FIIs as per Friday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 14741.29 crore against gross selling of Rs 13352.09 crore, while in the debt segment, the gross purchase was of Rs 905.32 crore with gross sales of Rs 175.85 crore. Besides, in the hybrid segment, the gross buying was of Rs 114.70 crore against gross selling of Rs 101.48 crore.

The US markets ended higher on Friday as investors digest data hinting that the Federal Reserve can pull off a soft landing for the world's largest economy. Asian markets are trading mostly in red on Monday as investors look ahead to key economic data and events in the following days. Indian markets ended the choppy session in green terrain on Friday as investors booked profit in pharmaceutical, and metal stocks. Today, markets are likely to get cautious start amid rising geopolitical crisis. China announced sanctions on five US defence-related companies in response to sanctions on Chinese companies and arm sales to Taiwan. Elsewhere, North Korea has been firing artillery shells near South Korean sea boundary for the last three days, following a provocative statement from Kim Yo Jong, the sister and key ally of North Korea's supreme leader Kim Jong Un. Domestically, traders will be concerned as a report by economic think tank GTRI said the increasing Red Sea crisis may impact trade as it is expected to push shipping costs by up to 60% and insurance premium by 20%. Due to these attacks, the shippers are taking consignments through the Cape of Good Hope, resulting in delays of about 20 days. Traders may take note of the Finance Ministry's statement that as many as 29,273 bogus firms involved in alleged input tax credit (ITC) evasion of Rs 44,015 crore have been identified since the special hunt against false registrations began in mid-May 2023. Meanwhile, the Reserve Bank of India has tightened rules for the issuance of short term Commercial Papers and NCDs, with an initial maturity of up to one year. The new norms, which come into effect from April 1, involve six key changes. However, some respite may come later in the day as the first advance estimates of national income released by the National Statistical Office projected the Indian economy to grow at 7.3% in 2023-2024 - higher than the Reserve Bank of India's estimate of 7% - assuming an investment-led recovery in the world's fifth largest economy. This beats the Street estimates by a wide margin. The Indian economy grew 7.7% in the first half (April-September) of FY24. Some support may come as the Reserve Bank said India's forex reserves jumped by $2.759 billion to $623.2 billion in the week ended December 29. In the previous reporting week, the overall reserves had increased by $4.471 billion to $620.441 billion. There will be some reaction stocks related to agriculture sector as the first advance estimates of national income released by the National Statistical Office (NSO) showed that the agriculture sector is projected to see a growth of 1.8% in the FY24, a seven-year low, due to poor Kharif harvest and weak initial sowing of Rabi crops. Insurance industry stocks will be in limelight as the monthly premiums of non-life insurance companies grew by 14.74% in December 2023 to Rs 25,098.18 crore from Rs 21,874.61 crore in the year-ago month. According to the General Insurance Council (GIC)'s monthly data, public-sector general insurance companies grew 13.10%.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,710.80

21,643.46

21,763.86

BSE Sensex

72,026.15

71,818.50

72,195.15

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

713.30

133.70

132.39

135.49

NTPC

274.56

315.30

310.11

323.06

ONGC

207.44

215.65

213.30

217.75

Power Grid

163.45

240.80

238.40

244.10

State Bank of India

159.85

641.45

635.55

649.55

  • Power Grid Corporation of India has been declared as successful bidder under TBCB to establish Inter-State Transmission System for Transmission Scheme for Solar Energy Zone in Bidar (2500 MW), Karnataka on BOOT basis.
  • State Bank of India has raised $250 million through issuance of the Green Notes to fund sustainable projects.
  • GAIL (India) has signed a Long Term Liquefied Natural Gas deal with Vitol Asia Pte in India for a supply of around one million metric tons of LNG per annum for a period of about 10 years, commencing 2026.
  • Tata Motors' subsidiary -- Tata Passenger Electric Mobility has introduced its first advanced Pure EV architecture - acti.ev.

News Analysis