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Market Commentary 09 January 2024
Benchmarks likely to get gap-up opening on firm global cues

Snapping their two-day winning streak, Indian equity benchmarks ended with deep losses on Monday, as investors pared exposure to FMCG, Basic Materials and banking stocks amid a weak trend in global markets. After opening with marginal gains, key indices slipped into negative territory and traded under pressure throughout the day, as traders were concerned with a report by economic think tank GTRI stating that the increasing Red Sea crisis may impact trade as it is expected to push shipping costs by up to 60 per cent and insurance premium by 20 per cent. Some cautiousness also came with India Ratings and Research Chief Economist Devendra Kumar Pant's statement that the Indian economy is facing the challenge of lower consumption growth as high inflation is impacting people in the lower income bracket. He said although the country's economy is now resilient enough to deal with the dual shocks of below-normal monsoon and high global oil prices, the challenge is to bring down inflation so that people can have more disposable income in their hands. Markets extended losses in late afternoon deals and finally settled around the day's lows, as traders preferred to stay on the sidelines ahead of the earnings season which kick starts on Thursday. Traders overlooked the first advance estimates of national income released by the National Statistical Office (NSO) which projected the Indian economy to grow at 7.3 per cent in 2023-2024 - higher than the Reserve Bank of India's estimate of 7 per cent - assuming an investment-led recovery in the world's fifth largest economy. Traders also paid no heed towards Commerce Secretary Sunil Barthwal's statement that India's agriculture exports, which stood at over $50 billion at present, are expected to double by 2030 and reach $100 billion. He said that the country is targeting $2 trillion worth of exports of goods and services by 2030. Finally, the BSE Sensex fell 670.93 points or 0.93% to 71,355.22 and the CNX Nifty was down by 197.80 points or 0.91% to 21,513.00.

The US markets ended sharply higher on Monday with Nasdaq settling over two percent higher. Support came in as drop in bond yields after a New York Fed survey found U.S. one-year inflation expectations were at their lowest since January 2021. The Dow also ended higher, despite a decline in Boeing shares after a piece of a MAX jet blew off midflight and forced an emergency landing. Shares in supplier Spirit AeroSystems also slumped. However, Megacaps advanced, lifting stocks such as Amazon.com which closed up 2.66 per cent and Alphabet, which rose 2.29 per cent, as Treasury yields fell ahead of readings on inflation and a new supply of government debt this week, with the benchmark 10-year US Treasury yield hitting a low of 3.966 per cent on the session. In addition, Apple climbed 2.42 per cent after the iPhone maker said its Vision Pro mixed-reality device will be available for sale from February 2 in the United States. Nvidia surged 6.3 per cent and fellow chipmaker Advanced Micro Devices (AMD.O) jumped 5.48 per cent, helping to push the Philadelphia SE Semiconductor Index up 3.28 per cent as it bounced from a 5.8 per cent drop last week, its biggest weekly percentage fall since October 2022.

Crude oil futures ended deeply in red on Monday after Saudi Arabia cut crude prices to all regions and as surveys showed higher production by members of the Organization of the Petroleum Exporting Countries. State-owned producer Saudi Aramco on Sunday said it would cut its official selling price for crude to all regions, including its largest market in Asia in February. The spread for Saudi crudes, including its flagship Arab light, over local benchmarks will be cut by up to $2 a barrel. Further, oil prices also fell as a resurgence in Covid cases in China raised concerns about energy demand. Benchmark crude oil futures for February delivery fell by $3.53 or 3.5 percent to settle at $98.54 a barrel on the New York Mercantile Exchange. Brent crude for March delivery dropped by $2.64 or 3.51 percent to settle at $76.12 a barrel on London's Intercontinental Exchange.

Indian rupee pared initial gains and ended almost unchanged against the dollar on Monday as strong American currency and volatile crude oil prices weighed on the domestic currency. Some cautiousness also came with India Ratings and Research Chief Economist Devendra Kumar Pant's statement that the Indian economy is facing the challenge of lower consumption growth as high inflation is impacting people in the lower income bracket. He said although the country's economy is now resilient enough to deal with the dual shocks of below-normal monsoon and high global oil prices, the challenge is to bring down inflation so that people can have more disposable income in their hands. On the global front, the dollar held on to most of last week's gains on Monday after posting its biggest weekly rise against a basket of other major currencies since July, putting a halt to the declines seen in late 2023. Finally, the rupee ended at 83.14 (Provisional), stronger by 1 paisa from its previous close of 83.15 on Friday.

The FIIs as per Monday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 12638.83 crore against gross selling of Rs 10869.78 crore, while in the debt segment, the gross purchase was of Rs 1883.42 crore with gross sales of Rs 218.32 crore. Besides, in the hybrid segment, the gross buying was of Rs 21.47 crore against gross selling of Rs 29.86 crore.

The US markets ended higher on Monday as mega-cap tech stocks bounced from last week's declines. Asian markets are trading mostly in green on Tuesday rebounding from a selloff in the previous session. Investors assessed December inflation numbers for Japan's capital city of Tokyo, which are a leading indicator for nationwide inflation. Indian markets snapped their two-day winning streak on Monday amid a retreat in the global markets as the 10-year US bond yields once again surpassed the 4 per cent level. Today, markets are likely to get gap-up opening tracking firm global cues. Foreign fund inflows likely to aid domestic sentiments. Provisional data from the NSE showed that foreign institutional investors (FIIs) bought shares worth Rs 16.03 crore on January 8. Sentiments will get a boost as Commerce Secretary Sunil Barthwal said India's agriculture exports, which stood at over $50 billion at present, are expected to double by 2030 and reach $100 billion. He said that the country is targeting $2 trillion worth of exports of goods and services by 2030. Some support will also come as US crude oil declined 4 percent on Monday after Saudi Arabia slashed its prices, raising renewed worries that the market is oversupplied at the same time as demand is weakening. Traders may take note of a report that Indian government bonds could get an additional boost in 2024, with Bloomberg proposing their inclusion in its indices starting September 2024. Besides, India's mutual fund industry added a record Rs 10 lakh crore to its assets under management in 2023, taking the cumulative tally to Rs 50.7 lakh crore in December. However, there may be some cautiousness with a private report that India may see around $30 billion shaved off its total exports in the current fiscal year, as threats to cargo vessels in the Red Sea lead to a surge in container shipping rates and prompt exporters to hold back on shipments. Meanwhile, the Reserve Bank has raised the minimum capital requirement for small finance banks to Rs 200 crore and permitted Payments Bank to upgrade as SFBs. Banking stocks will be in focus with a private report stating that gaining from high credit off-take and lower credit costs, banks are likely to post 16.7 per cent year-on-year (Y-o-Y) growth in net profit during the third quarter of the financial year ended December 2023 (Q3 FY24). However, sequentially, net profit may shrink by 2.4 per cent over the second quarter ended September 2023 (Q2).

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

Index

Previous close

Support

Resistance

NSE Nifty

21,513.00

21,415.95

21,687.00

BSE Sensex

71,355.22

71,043.59

71,924.32

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

395.60

132.30

130.71

134.91

ONGC

193.11

217.65

216.24

219.94

State Bank of India

147.40

627.90

620.30

640.25

Power Grid

135.86

242.00

239.85

244.70

Kotak Mahindra Bank

122.53

1825.85

1812.49

1845.34

  • ONGC has successfully commenced First Oil production from the deep-water KG-DWN-98/2 Block, situated off the coast of Bay of Bengal.
  • UltraTech Cement has introduced five electric trucks for transport of clinker from its integrated cement manufacturing unit Dhar Cement Works, located in Madhya Pradesh, to its grinding unit Dhule Cement Works, located in Maharashtra.
  • Dr Reddy's Laboratories is recalling over 8,000 bottles of a generic medication used to prevent rejection of a transplanted organ from the US market due to a packaging error.
  • JSW Steel's subsidiary -- JSW Utkal Steel has received the possession of land in Odisha for setting up a greenfield steel plant.

News Analysis