Friday turned out to be a
horrendous day of trade for Indian equity benchmarks with frontline gauges
shaved off over one and a half percent each as traders were worried that
aggressive interest rate hikes to tame surging inflation may dent global
economic growth in the coming time. Markets started the day on pessimistic note
as India Ratings said inflation, supply chain disruptions and a weak
consumption demand could upset the revival in credit growth in the medium term.
It said the reversal of the interest rate cycle--marked by the Reserve Bank of
India's 40 basis points increase in policy repo rate -- would weigh down credit
growth as borrowings become costlier. Sentiments also remained dampened as
consequent to the 40 basis point hike in the repo rate announced by the Reserve
Bank of India (RBI), large banks such as ICICI Bank and Bank of Baroda have
raised their lending rates by an equal amount on loans linked to the external
benchmark. Market participants overlooked commerce and industry minister Piyush
Goyal's statement that all the key indicators such as jump in exports and high
GST collection in April reflect that the country's economy is on the growth
path. Sentiments continued to remain dampened throughout the day as traders
remain concerned amid a private report stating that India's central bank hiked
its key lending rate in a surprise move fearing shocker inflation numbers for
April, adding the ultimate aim is to reverse its pandemic-era ultra-loose rate
regime. Adding some more worries, India has raised concerns at the World Trade
Organization (WTO) over a host of trade barriers built in by Indonesia,
including export restrictions on palm oil and import curbs on bovine meat and
automotive (auto) parts, holding that such measures have adversely impacted
India. Continuous foreign fund outflows and mixed corporate earnings results
also impacted traders' sentiments. So far this week, foreign investors have net
sold Indian equities worth $635 million, compared with $881 million offloaded
in the same period last week. Finally, the BSE Sensex fell 866.65 points or
1.56% to 54,835.58 and the CNX Nifty was down by 271.40 points or 1.63% to
16,411.25.
The US markets extended their
previous session's losses and ended lower on Friday. The lower close on Wall
Street came following the release of a closely watched Labor Department report
showing stronger than expected job growth in the month of April. The report
showed non-farm payroll employment surged by 428,000 jobs in April, matching
the revised jump seen in March. Street had expected employment to climb by
391,000 jobs compared to the addition of 431,000 jobs originally reported for
the previous month. Meanwhile, the Labor Department said the unemployment rate
came in unchanged at 3.6 percent versus expectations the rate would edge down
to 3.5 percent. With the report showing continued strength in the labor market,
the Federal Reserve will continue with its plans to raise interest rates
relatively sharply over the coming months. Worries about the outlook for
interest rates may have weighed on Wall Street along with a continued increase
in treasury yields. On the sectoral front, airline stocks moved sharply lower
on the day, with the NYSE Arca Airline Index plummeting by 3.1 percent to a
nearly two-month closing low. Substantial weakness was also visible among
biotechnology stocks, as reflected by the 2.8 percent plunged by NYSE Arca
Biotechnology Index. The index ended the session at its lowest closing level in
over two years. Brokerage, networking and retail stocks also saw considerable
weakness on the day, adding to the steep losses posted in the previous session.
On the other hand, energy stocks moved sharply higher over the course of the
session, benefiting from a notable increase by the price of crude oil.
Crude oil futures settled notably
higher on Friday amid worries about supply following the European Union's
decision proposing some of its toughest measures yet against Russia, including
a total ban on oil imports. According to reports, the EU is willing to exempt
some central European member states from its proposed embargo on Russian oil.
Meanwhile, the OPEC countries are against replacing Russian oil amid concerns
about slower demand in China. According to a report from Baker Hughes, the
number of total active drilling rigs in the United States rose by 7 this week,
after an increase of 3 rigs in the week prior. The total rig count increased to
705 this week, 257 rigs higher than the rig count this time in 2021, the report
said. Oil rigs in the United States rose this week by 5 rigs to 557, while gas
rigs rose by 2 to 146. Benchmark crude oil futures for June delivery added
$1.51 or 1.4% percent to settle at $109.77 a barrel on the New York Mercantile
Exchange. Brent crude for July delivery gained $2.04 or 1.84 percent to settle
at $112.94 (Provisional) a barrel on London's Intercontinental Exchange.
Indian rupee ended considerably
lower against dollar on Friday, on account of sustained dollar demand from
importers and banks on worries that the Federal Reserve's interest rate hike
this week may not be enough to help fight surging inflation. Continuous foreign
fund outflows and mixed corporate earnings results also impacted traders'
sentiments. So far this week, foreign investors have net sold Indian equities
worth $635 million, compared with $881 million offloaded in the same period
last week. Investors were worried as India Ratings said inflation, supply chain
disruptions and a weak consumption demand could upset the revival in credit
growth in the medium term. Massive sell off in Indian equity market also hit
the rupee sentiment. On the global front, dollar index hovered near 20-year
highs against major peers on Friday, as market sell-offs in the face of global
recession fears propped up the safe-haven currency. Finally, the rupee ended at
76.92 (Provisional), weaker by 57 paise from its previous close of 76.35 on
Thursday. The currency touched a high and low of 76.33 and 75.99 respectively.
The FIIs as per Friday's data
were net sellers in equity segment, while net buyers in debt segment. In equity
segment, the gross buying was of Rs 5634.45 crore against gross selling of Rs
7194.69 crore, while in the debt segment, the gross purchase was of Rs 705.74
crore with gross sales of Rs 586.24 crore. Besides, in the hybrid segment, the
gross buying was of Rs 3.66 crore against gross selling of Rs 3.06 crore.
The US markets ended lower on
Friday as investors assessed whether the Fed will need to be more aggressive
than expected in raising interest rates to tackle inflation. Asian markets are
trading mostly in red on Monday amid concerns about higher interest rates and a
tightening lockdown in Shanghai that stoked fears about global economic growth.
Indian markets slumped to two-month closing lows on Friday amid weak global
cues as investors fretted over worsening inflation and its repercussions on
global growth. Today, domestic markets are likely to continue their weak trend
with gap-down opening as global sentiment continues to weigh on equities.
Crucial macro-economic data such as industrial output and retail inflation
reading will be on investors' radar this week. Traders will be concerned with a
private report that foreign funds' ownership in domestic equities fell to
pre-COVID lows and hit a multi-year low of 19.5 per cent in March this year in
NSE500 companies valued at $619 billion. However, some respite may come later
in the day as a private report stated that with the e-way bills generated for
inter-state trade in goods under the Goods and Services Tax (GST) regime in
April turning out to be the second highest so far, the monthly GST collections
may hit Rs 1.5 trillion benchmark again in May (April transactions). Some
support may come with a periodic labour force survey by the National
Statistical Office (NSO) showing that the unemployment rate for persons of 15
years and above in urban areas slipped to 8.7 per cent in October-December 2021
from 10.3 per cent in the year-ago quarter. There will be some buzz in the
sugar industry stocks as the Centre has allowed an additional 2,051 metric
tonnes of raw sugar to be exported to the US under the Tariff Rate Quota (TRQ)
for the US fiscal year 2022. Power stocks will be in focus as total outstanding
dues of electricity distribution companies to power producers rose by 4.04 per
cent year-on-year to Rs 1,21,765 crore (Rs 1.21 trillion) in May 2022. There
will be some reaction in insurance industry stocks with report that the
government may infuse Rs 3,000-5,000 crore additional capital in the three
public sector general insurance companies based on their performance and
requirement during the year. Paper industry stocks will be in limelight as
industry body IPMA said that paper consumption in India is likely to witness 6
to 7 per cent annual growth and will reach 30 million tonnes by FY 2026-27,
largely driven by emphasis on education and literacy coupled with growth in
organised retail. There will be lots of earnings reaction based on the
performance of the companies.
Support and
Resistance: NSE (Nifty) and BSE (Sensex)
Index
|
Previous close
|
Support
|
Resistance
|
NSE
Nifty
|
16,411.25
|
16,340.04
|
16,483.34
|
BSE
Sensex
|
54,835.58
|
54,591.52
|
55,074.89
|
Nifty Top volumes
Stock
|
Volume
|
Previous close (Rs)
|
Support (Rs)
|
Resistance (Rs)
|
(in Lacs)
|
ITC
|
344.90
|
265.65
|
260.59
|
269.04
|
Tata Motors
|
251.42
|
409.85
|
404.50
|
417.70
|
NTPC
|
226.04
|
159.20
|
156.71
|
161.01
|
Oil & Natural Gas Corporation
|
167.68
|
166.95
|
162.90
|
169.20
|
State Bank of India
|
167.10
|
485.50
|
475.64
|
490.74
|
M&M's Farm Equipment Sector has signed a MoU with the Jammu & Kashmir Bank to finance Mahindra's range of tractors and farm machinery.
ICICI Bank has hiked its external benchmark lending rate by 40 basis points or bps to 8.10 per cent.
HDFC Bank has added over 1,000 branches to its network over the past two years.
Kotak Mahindra Bank has increased interest rates on fixed deposit across multiple tenor baskets for its retail customers by up to 0.35 per cent.