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Market Commentary 08 July 2022
Markets to get gap-up opening on strong global cues

 

Indian equity benchmarks ended higher for a second straight day and settled around a percent higher on Thursday, following positive trends in global markets.  Domestic bourses made a gap up opening and stayed in green for whole day, as sentiments got a boost with 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. Some optimism also came as Finance ministry released the fourth instalment of revenue deficit grant of Rs 7,183 crore to 14 states for the current fiscal. Markets remained firm in late afternoon deals, taking support from the principal economic advisor with the Department for Promotion of Industry and Internal Trade, Rupa Dutta's statement that the government is working on to reduce compliance issues with a focus on ease of doing business and has introduced the Insolvency and Bankruptcy Code (IBC) keeping that in mind. Traders took some solace with private report stated that the slew of measures announced by Reserve Bank of India (RBI) to enhance foreign exchange inflows should help rupee to outperform its peers in emerging market economies. Additional support also came as Commerce and industry minister Piyush Goyal reviewed the progress of the implementation of the PM GatiShakti national master plan, which aims at giving a push to the country's multi-modal infrastructure network. Finally, the BSE Sensex rose 427.49 points or 0.80% to 54,178.46 and the CNX Nifty was up by 143.10 points or 0.89% to 16,132.90.

 

The US markets ended higher on Thursday, extending their previous session's gains, as investors indulged in some strong buying in several sectors amid hopes the central bank would gradually start lightening its policy stance later this year. The minutes from the Federal Reserve's June meeting, released on Wednesday, 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. Still, worries about a recession eased a bit as Fed officials have acknowledged that higher rates might have a larger-than-anticipated impact on growth and feel that an increase of 50 or 75 basis points would likely be appropriate at the policy meeting in July. On the economic data front, data released by the Commerce Department shows US trade deficit narrowed to $85.5 billion in May of 2022, from $87.1 billion a month earlier. Exports were up 1.2 percent or $3.0 billion in May from a month earlier, to $255.9 billion, while imports increased to $341.4 billion in May from $339.5 billion in April. Data from the Labor Department showed initial jobless claims rose to 235,000 in the week ended July 2nd. On a non-seasonally adjusted basis, initial claims rose by 11,919 from the previous week to 219,507. On the sectoral front, energy stocks were among those leading the gains on Thursday, reversing some recent losses as oil prices rebounded. Exxon rose 3.2%, and Occidental Petroleum gained nearly 4%.

 

Crude oil futures ended higher on Thursday despite data showing an unexpected increase in US crude supplies last week. Data from Energy Information Administration (EIA) showed crude inventories in the US rose by 8.2 million barrels in the week ended July 1. The EIA data showed gasoline supplies dropped by 2.5 million barrels in the week, while distillate stockpiles fell by 1.3 million barrels. The EIA data also showed oil stocks in the Strategic Petroleum Reserve fell to 492 million barrels, from 497.9 million barrels from a week earlier.  Besides, a report from the American Petroleum Institute on Wednesday showed U.S. crude supplies increased by 3.8 million barrels last week. Benchmark crude oil futures for August delivery rose $4.20 or 4.3 percent to settle at $102.73 a barrel on the New York Mercantile Exchange. Brent crude for September delivery surged $4.04 or 4 percent to settle at $104.73 (Provisional) a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker against dollar on Thursday as the hawkish stance of the U.S. Federal Reserve increased the possibility of another aggressive rate hike this month. U.S. Federal Reserve's minutes of the meeting held last month indicated a hawkish stance and a rate hike of 75 basis points is likely in July. Traders were worried as foreign institutional investors were net sellers in the capital market on Wednesday as they offloaded shares worth Rs 330.13 crore, as per stock exchange data. On the global front, dollar retreated from near a two-decade high against major peers on Thursday, tracking an easing in Treasury yields, while U.S. equity futures accelerated gains as investors continued to assess the economic outlook. Finally, the rupee ended at 79.13 (provisional), weaker by 19 paisa from its previous close of 78.94 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in equity segment and net buyers in debt segments. In equity segment, the gross buying was of Rs 7000.09 crore against gross selling of Rs 7795.59 crore, while in the debt segment, the gross purchase was of Rs 1168.72 crore against gross selling of Rs 244.06 crore. Besides, in the hybrid segment, the gross buying was of Rs 8.29 crore against gross selling of Rs 4.23 crore.

 

The US markets ended higher on Thursday as fears of an economic slowdown cooled and sterling began to claw back recent losses following British Prime Minister Boris Johnson's decision to resign. Asian markets are trading in green on Friday following a strong session on Wall Street overnight. Indian markets scaled their highest closing levels in a month for a second straight day on Thursday amid gains across most sectors, led by financial and IT shares. Today, markets are likely to extend their bull run with gap-up opening mirroring firm global cues. Sentiments will get boost as Economic Affairs Secretary Ajay Seth said the measures taken by Reserve Bank of India (RBI) will increase inflows of overseas funds and help in strengthening the rupee against the US dollar. RBI on Wednesday raised the overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds as it announced a slew of measures to boost foreign exchange inflows. Besides, Finance Minister Nirmala Sitharaman has asked the Niti Aayog to prepare a report mapping all the industrial activities such as corridors, logistics parks and pharma hubs so that they can be incorporated under the PM Gati Shakti initiative of the government. Meanwhile, Reserve Bank of India (RBI) Governor Shaktikanta Das has asked state governments to find out effective ways to address the issues related to debt and cash management. There will be some buzz in the insurance industry stocks with a private report that the life insurance industry has reported a meagre growth of 4.15 per cent in new business premiums in June, mainly due to the contraction in Life Insurance Corporation (LIC) premiums. However, in the April-June quarter (Q1FY23) life insurers saw their new business premiums (NBP) rise by 40 per cent over the same period a year ago, on account of lower base. IT industry stocks will be in focus as ratings agency Crisil said the information technology services sector will see a sharp fall in revenue growth to 12-13 per cent in FY23 from 19 per cent in FY22. However, it said the current depreciation in the rupee, strong demand for new age technologies like artificial intelligence, cloud computing and Internet of Things will help the over $220-billion sector maintain a double digit growth. There will be some reaction in power stocks as Union minister R K Singh said coal import for 10 per cent blending for the electricity plants to avoid blackouts will result in a rise in power tariff by 60-70 paise per unit. Investors will be eyeing corporate earnings report with the IT behemoth Tata Consultancy Services is likely to report June quarter 2022 (Q1FY23) earnings post market hours today. There are expectation that the IT services company to report a steady Q1 buoyed by deal wins and strong demand momentum.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

16,132.90

16,069.06

16,173.61

BSE Sensex

54,178.46

53,985.55

54,313.08

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Oil and Natural Gas Corporation

362.29

123.50

121.79

124.69

Hindalco Industries

186.99

364.40

348.96

372.16

NTPC

181.44

140.95

139.39

142.64

Tata Motors

176.16

431.75

423.05

436.70

ITC

137.94

291.80

289.15

293.80

 

  • Titan Company has reported nearly three-fold jump in its sales in the first quarter April-June quarter on a year-on-year basis, helped by a low base of the Covid-19 impacted quarter in the last year. 
  • NTPC's wholly owned subsidiary -- NTPC Renewable Energy has signed MoU with Gujarat Alkalies and Chemicals.
  • Reliance Industries' subsidiary -- Reliance Retail has entered into long-term franchise agreement with Gap.
  • Bharti Airtel's subsidiary -- Bharti Airtel International (Netherlands) B.V. has raised tender offer to buy back up to $450 million of senior notes.
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