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Market Commentary 10 January 2024
Markets likely to get negative start amid weak global cues

Indian equity benchmarks gave up almost all gains and ended flat with a positive bias on Tuesday amid profit-booking by investors towards the end of session. Investors awaited key macroeconomic numbers and the December quarter earnings of IT majors Infosys and TCS. Equity markets started the trade on an optimistic note amid foreign fund inflows. Provisional data from the NSE showed that foreign institutional investors (FIIs) bought shares worth Rs 16.03 crore on January 8. Sentiments remained up-beat with report stating that the next round of talks for the proposed free trade agreement (FTA) between India and Oman will start from January 16 and the negotiations for the pact are progressing well. The talks on the text of most of the chapters have been concluded by both sides for the pact. However, profit booking in the fag-end session erased majority of the gains. Traders got anxious 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. Traders overlooked 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). 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. Finally, the BSE Sensex rose 30.99 points or 0.04% to 71,386.21 and the CNX Nifty was up by 31.85 points or 0.15% to 21,544.85.

The US markets ended mostly in red on Tuesday as some traders looked to cash in on Monday's strong gains amid lingering uncertainty about the outlook for interest rates. While the Federal Reserve is widely expected to leave interest rates unchanged later this month, traders have recently become increasingly skeptical about whether the central bank will cut rates in March. Meanwhile, traders seemed reluctant to make move significant bets ahead of the release of key inflation data later this week. The Labor Department is due to release its reports on consumer and producer price inflation, which could have a significant impact on the outlook for rates. On the sectoral front, despite the recovery attempt by the broader markets, tobacco stocks continued to see substantial weakness on the day, with the NYSE Arca Tobacco Index plunging by 3.7 percent. Significant weakness also remained visible among oil service stocks, as reflected by the 2.4 percent slump by the Philadelphia Oil Service Index. The weakness in the sector came despite a rebound by the price of crude oil. On the economic data front, the Commerce Department released a report showing the U.S. trade deficit unexpectedly shrank in the month of November. The report said the trade deficit narrowed to $63.2 billion in November from a revised $64.5 billion in October. Street had expected the trade deficit to widen to $65.0 billion from the $64.3 billion originally reported for the previous month. The unexpectedly smaller trade deficit came as the value of imports tumbled by 1.9 percent to $316.9 billion, while the value of export slumped by 1.9 percent to $253.7 billion.

Crude oil futures end sharply higher on Tuesday as rising geopolitical risks raised concerns about possible supply and trade disruptions. The closure of Libya's largest oilfield contributed to the jump in oil prices. The closure of the Sharara oilfield in Libya, which is one of the biggest in the country, has resulted in a shortfall of 300,000 barrels per day. Due to security threats from Houthi militants amid the tensions in the Middle East, several major shipping companies are staying away from the Red Sea route. Benchmark crude oil futures for February delivery rose by $1.47 or 2.1 percent to settle at $72.24 a barrel on the New York Mercantile Exchange. Brent crude for March delivery surged by $1.47 or 1.9 percent to settle at $77.59 a barrel on London's Intercontinental Exchange.

Indian rupee erased initial gains and ended almost flat against the dollar on Tuesday as investors looked ahead to the release of inflation data this week from India, the U.S., China and Japan for directional cues. Some concern also came with a private report stating 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. However, traders took some support with provisional data from the NSE showing that foreign institutional investors (FIIs) bought shares worth Rs 16.03 crore on January 8. On the global front, a decline in U.S. consumer inflation expectations kept the dollar rally in check on Tuesday as traders reaffirmed their bets for a slew of Federal Reserve rate cuts this year. Finally, the rupee ended at 83.13 (Provisional), stronger by 1 paisa from its previous close of 83.14 on Monday.

The FIIs as per Tuesday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 10336.40 crore against gross selling of Rs 10051.40 crore, while in the debt segment, the gross purchase was of Rs 755.56 crore with gross sales of Rs 658.34 crore. Besides, in the hybrid segment, the gross buying was of Rs 6.17 crore against gross selling of Rs 18.13 crore.

The US markets ended mostly in red on Tuesday as hopes of a rate cut by Fed in March were seen decreasing; with inflation data later this week to guide sentiment. Asian markets are trading mixed on Wednesday ahead of Australia's November inflation data. Indian markets started on a strong footing amid a global rally but ended sharply off highs on Tuesday amid selling in bank stocks. Today, markets are likely to get negative start tracking weakness across global markets. Foreign fund outflows likely to dent sentiments. Provisional data from the NSE showed that foreign institutional investors (FIIs) sold shares worth Rs 990.90 crore on January 9. Traders will be concerned with a private report that India's retail inflation likely edged up in December on higher food prices but stayed within the Reserve Bank of India's target range for a fourth consecutive month. Food prices, which account for about half of the inflation basket, rose in November and remained elevated last month, largely led by vegetable prices and household staples. Some cautiousness will also come with report that the weighted average rates of state debt continued to remain at an over two-year high of 7.72 per cent at the second weekly auction of the quarter on Tuesday, making it the highest so far this fiscal. However, some respite may come later in the day as a foreign brokerage report stated that the Indian economy is likely to grow at 6.2 per cent in the next fiscal, mainly due to the favourable combination of neutral policy settings, positive credit momentum, and manageable macros amid a 15-year high household debt levels. It noted despite the rising external headwinds, India is likely to grow 6.2 per cent next fiscal against a consensus of 6.3 per cent to $3.9 trillion from $3.57 trillion in FY24 on a likely 7 per cent growth, as consumption growth is likely to stabilise at 4.7 per cent from 4.5 per cent in FY24. Also, the World Bank has retained India's economic growth forecast at 6.3% for the current financial year, and 6.4% for the next, citing slow post-pandemic recovery. Meanwhile, the next round of talks for the proposed Free Trade Agreement (FTA) between India and the UK will start here from January 10 to resolve remaining issues and conclude the negotiations. The 13th round of negotiations for the proposed pact was held between September 18 and December 15. There will be some reaction in insurance industry stocks with report that the life insurance industry's new business premium increased by 43.76 per cent year-on-year (YoY) in December 2023, helped by state-owned Life Insurance Corporation (LIC) and private insurers. Private insurers' premiums increased 4.15 per cent YoY to Rs 15601.85 crore from Rs 14979.79 crore.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,544.85

21,466.99

21,673.59

BSE Sensex

71,386.21

71,117.17

71,845.37

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

307.37

133.85

132.64

134.94

Adani Port

147.01

1200.95

1176.34

1227.74

ICICI Bank

146.60

978.00

970.60

990.20

State Bank of India

134.00

625.95

622.19

632.04

Tata Motors

128.73

801.00

793.04

809.09

  • Tata Motors' Group global wholesales in Q3FY24, including Jaguar Land Rover were at 338,177 nos., higher by 9%, as compared to Q3 FY23.
  • JSW Steel has reported the crude steel production for Q3FY24 at 6.87 million tonnes, that grew by 12% as against 6.14 million tonnes in Q3FY23 on consolidated basis.
  • Eicher Motors' motorcycle arm -- Royal Enfield has signed a non-binding MoU with the Government of Tamil Nadu at Global Investors Meet 2024, at Chennai.
  • Bharti Airtel's B2B arm -- Airtel Business is all set to power over 2 crore smart meters for Adani Energy Solutions.

News Analysis