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NSE Intra-day chart (07 June 2022)
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Market Commentary 08 June 2022
Benchmarks likely to open in green ahead of RBI policy outcome

 

Falling for the third day in a row, Indian equity benchmarks ended sharply lower on Tuesday on the back of selling across counters as caution set in among investors ahead of RBI's monetary policy decision due on June 8. The RBI's Monetary Policy Committee is expected another round of hike in benchmark interest rates to contain inflation that continues to remain above the central bank's upper tolerance level. Markets made a gap-down opening and traded in red throughout the session, as traders remained cautious with ratings and research firm Acuite Ratings & Research's report that the expectation of the expansion of the current account deficit is not just driven by elevated global commodity prices, but is also linked to the unlocking of the economy reviving pent-up demand and improved vaccination cover aiding an organic recovery in the economy. Sentiments remained weak in late afternoon deals, as exchange data showed Foreign Institutional Investors (FII) continued to be net sellers of domestic stocks on Monday. FIIs pulled out Rs 2,397 crore from domestic stocks. Besides, weakness in global markets on inflationary concerns weighted on the domestic investors. Traders failed to get any sense of relief with Finance minister Nirmala Sitharaman's statement that the country's growth will be driven by fiscal spending. She said BRICS should continue to serve as a platform to engage in dialogues and facilitate exchange of experiences, concerns and ideas for rebuilding a sustainable and inclusive growth trajectory. Traders also paid no heed towards Minister of State for Commerce and Industry Anupriya Patel's statement that free trade agreements (FTAs) with the UAE and Australia will help promote exports of goods such as garments, engineering products, handicrafts, textiles, and agri processed items. Finally, the BSE Sensex fell 567.98 points or 1.02% to 55,107.34 and the CNX Nifty was down by 153.20 points or 0.92% to 16,416.35. 

The US markets ended higher in a volatile session on Tuesday amid investors continued to assess the outlook for inflation and economic growth. Strong buying in the energy section following a surge in crude oil prices contributed significantly to markets' positive close. However, worries about slowing growth, a weak margin guidance from Target, and a sell-off in the technology space contributed to market's weakness in early trades. Target shares ended lower by 2.3 percent, weighed down by the company's weak earnings guidance. Walmart shares dropped by about 1.25 percent. Though, shares of retailer Khol's Corporation soared nearly 10 percent, riding on reports about a potential takeover bid from Franchise Group. On the economic data front, the Commerce Department released a report showing the US trade deficit narrowed significantly in the month of April. The report said the trade deficit narrowed to $87.1 billion in April from $107.7 billion in March. Street had expected the deficit to shrink to $89.5 billion from the $109.8 billion originally reported for the previous month. The decrease in the size of the trade deficit came as the value of exports jumped by 3.5 percent to $252.6 billion, while the value of imports tumbled by 3.4 percent to $339.7 billion. 

Crude oil futures ended in green on Tuesday amid the prospect of higher demand as China relaxes its Covid curbs. Meanwhile, the US Energy Information Administration (EIA) has projected that US crude production and petroleum demand will both rise in 2022. Besides, Oil prices moved higher despite a recent decision by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, to increase output in July and August by 648,000 barrels per day, or 50% more than previously planned. Benchmark crude oil futures for July delivery gained $0.91 or 0.8 percent to settle at $119.41 a barrel on the New York Mercantile Exchange. Brent crude for August delivery rose $1.81 or 1.51 percent to settle at $ 121.32 (Provisional) a barrel on London's Intercontinental Exchange. 

Indian rupee ended weaker against the US dollar on Tuesday, on increased demand for the greenback from importers and banks. Persistent foreign capital outflows and elevated global crude oil prices also impacted the domestic unit. Investors remained on sidelines ahead of directional cues from central bank meetings and U.S. inflation data due later in the week. However, losses remain capped as some support came with Finance minister Nirmala Sitharaman's statement that the country's growth will be driven by fiscal spending. She said BRICS should continue to serve as a platform to engage in dialogues and facilitate exchange of experiences, concerns and ideas for rebuilding a sustainable and inclusive growth trajectory. On the global front, the U.S. dollar rose to a two-week high as rising U.S. Treasury yields supported the greenback, pushing the Japanese yen to its lowest level against the dollar in two decades. Finally, the rupee ended at 77.78 (Provisional), weaker by 12 paise from its previous close of 77.66 on Monday. 

The FIIs as per Tuesday's data were net sellers in both equity and debt segment. In equity segment, the gross buying was of Rs 4766.66 crore against gross selling of Rs 6620.88 crore, while in the debt segment, the gross purchase was of Rs 318.13 crore against gross selling of Rs 1862.99 crore. Besides, in the hybrid segment, the gross buying was of Rs 32.05 crore against gross selling of Rs 31.34 crore. 

The US markets ended higher on Tuesday as technology and energy shares gained. Asian markets are trading mostly in green on Wednesday tracking Wall Street rallies, with a cheap yen giving some support to exporters. Indian markets suffered sharp losses on Tuesday dragged by financial, IT and FMCG shares. Today, markets are likely to make optimistic start amid a rebound in global markets and ahead of the outcome of a key RBI policy meeting. Investors will be eyeing the decision of the RBI Governor Shaktikanta Das-headed Monetary Policy Committee (MPC), which started its deliberations on Monday, is scheduled to be announced at 10 am on today. Reserve Bank of India (RBI) is likely to raise the benchmark lending rate by 25-50 basis points on Wednesday as inflation continues to remain above its comfort level. Last month, RBI raised the repo rate or short term lending rate by 40 basis points in an off-cycle monetary policy review to check spiralling inflation. Some support will come with a private report that Job demand continued to be on a growth trajectory in May, witnessing a 9 per cent rise year-on-year, mainly supported by telecom, banking, financial services and insurance and import and export sectors. However, traders may be concerned as the World Bank cut India's economic growth forecast for the current fiscal to 7.5 per cent as rising inflation, supply chain disruptions and geopolitical tensions taper recovery. This is the second time that the World Bank has revised its GDP growth forecast for India in the current fiscal 2022-23 (April 2022 to March 2023). In April, it had trimmed the forecast from 8.7 per cent to 8 per cent and now it is projected at 7.5 per cent. Meanwhile, Finance minister Nirmala Sitharaman has asked regulatory bodies like National Financial Reporting Authority (NFRA) and Competition Commission of India (CCI) to be ahead of the curve and be more digital savvy to meet challenges of a fast-paced digitised society. There will be some buzz in banking stocks as RBI data showed bank credit grew by 11.04 per cent to Rs 120.27 lakh crore and deposits by 9.27 per cent to Rs 165.74 lakh crore in the fortnight ended May 20. According to the Scheduled Banks' Statement of Position in India as on May 20, 2022, in the fortnight ended May 21, 2021, bank advances stood at Rs 108.31 lakh crore and deposits at Rs 151.67 lakh crore. Coal industry stocks will be in focus as Moody's Investors Service said large coal-importing nations, including India, will look to ramp up the output of domestic coal to strengthen energy security and lessen dependence on the import of fossil fuels. There will be some reaction in jewellery stocks with a private report that India's gold imports in May jumped 677 per cent from a year ago to the highest level in a year as correction in prices just before a key festival and wedding season boosted retail jewellery purchases. Tea industry stocks will be in limelight as the Tea Board, under the commerce ministry, has issued directions to all producers and sellers of the commodity to strictly comply with quality norms of food safety regulator FSSAI before selling the product. 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

16,416.35

16,346.55

16,486.70

BSE Sensex

55,107.34

54,863.91

55,369.27

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Oil & Natural Gas corporation of India

614.11

161.40

156.09

164.84

NTPC

149.11

157.50

154.76

158.96

Coal India

129.61

197.50

194.09

200.44

Tata Motors

111.53

436.65

431.10

440.20

ITC

108.28

273.95

272.46

275.21

  • Coal India is aiming at green mining options and increase production from its underground mines, which are favourable for cleaner ecosystem, through installation of technologies. 
  • Tech Mahindra has opened an innovation and technology development centre, in Muscat, Oman. 
  • JSW Steel has reportedly commissioned a 0.30 million tonne one-of-its-kind Steel-Slag Sand plant at Vijayanagar Works in Karnataka on World Environment Day.  
  • Bharti Airtel's subsidiary -- Nxtra Data has entered into an agreement for acquisition of 51,17,000 (11.696%) equity shares in Avaada MHAmravati.

News Analysis