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Market Commentary 11 January 2024
Benchmarks to make flat-to-positive start; TCS, Infosys Q3 numbers eyed

Indian equity benchmarks ended the volatile day of trade near intraday high levels as bulls rejuvenate in late hour. Markets made a cautious start traded in green and red for most part of the day ahead of earnings of IT majors as well as key economic indicators like retail inflation and factory production for directional cues. Market participants remain 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. Investors also got anxious with report stating 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. At the same time, traders took support with foreign brokerage report stating 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. Sentiments also got support with World Bank's report where it is in its Global Economic Prospects report retained India's economic growth forecast at 6.3% for the current financial year (FY24). It said India is anticipated to maintain the fastest growth rate among the world's largest economies, but its post-pandemic recovery is expected to slow. It added that growth is then expected to recover gradually, edging up to 6.4% in FY2024-25 and 6.5 percent in FY2025-26. But, rally which took place in last leg of trade mainly helped markets to end near intraday highs. Traders turned optimistic, as Prime Minister Narendra Modi said that all major rating agencies are of the opinion that India will be among three largest economies in the world in next few years. Some support also came with a private report stating that the IPO and deal-making activities are likely to be brisk this year and may even surpass the record set in 2021 with around $50 billion funds being raised across equity issuances and deals. Finally, the BSE Sensex rose 271.50 points or 0.38% to 71,657.71 and the CNX Nifty was up by 73.85 points or 0.34% to 21,618.70.

The US markets ended higher with gains of around half percent on Wednesday. The strength on the markets reflected optimism ahead of the release of key U.S. inflation data in the comings days. The Labor Department's reports on consumer and producer price inflation, which are due to be released on Thursday and Friday, respectively, could have a significant impact on the outlook for interest rates. With street expecting the reports to show slowdowns in the annual rate of core price growth, the data could bolster optimism about near-term rate cuts by the Federal Reserve. However, if the data surprises to the upside, it could add to recent skepticism about whether the Fed will begin cutting rates in March. On the sectoral front, Software stocks showed a strong move to the upside on the day, driving the Dow Jones U.S. Software Index up by 1.6 percent to a record closing high. Considerable strength was also visible among housing stocks, as reflected by the 1.5 percent gain posted by the Philadelphia Housing Sector Index. On the economic data front, wholesale inventories in the U.S. dipped in line with economist estimates in the month of November, according to a report released by the Commerce Department. The Commerce Department said wholesale inventories edged down by 0.2 percent in November after falling by a revised 0.3 percent in October. Street had expected wholesale inventories to slip by 0.2 percent compared to the 0.4 percent decrease originally reported for the previous month. The modest decline in inventories came as inventories of non-durable goods fell by 0.5 percent in November after sliding by 0.7 percent in October, while inventories of durable goods came in unchanged for the second straight month. Meanwhile, the report said wholesales were virtually unchanged in November after tumbling by 1.5 percent in October.

Crude oil futures ended lower on Wednesday after data showed an unexpected increase in U.S. crude inventories in the week ended January 5th. Data from the Energy Information Administration (EIA) showed crude oil inventories in the U.S. rose by 1.338 million barrels last week, as against forecasts for a decline of about 700,000 barrels. Gasoline stocks increased 8 million barrels last week to 245 million barrels, while distillate stockpiles rose by 6.5 million barrels last week to 132.4 million barrels, the highest level since September 2021. Benchmark crude oil futures for February delivery fell by $0.87 or 1.20 percent to settle at $71.37 a barrel on the New York Mercantile Exchange. Brent crude for March delivery dropped by $0.79 or 1.02 percent to settle at $76.8 a barrel on London's Intercontinental Exchange.

Rising for the sixth straight session, Indian rupee ended higher against the dollar on Wednesday tracking a firm trend in equity markets and easing crude prices. A weakness in greenback overseas also boosted the domestic currency. Some support came in after the World Bank retained India's growth rate projection at 6.3 per cent for FY24 and 6.4 per cent for the next fiscal. On the global front, the Japanese Yen weakened following the release of weaker domestic wage growth data. The Labour Ministry reported that real wages in Japan shrank for the 20th month in November. This comes on top of falling rates of inflation in Tokyo -- Japan's capital city -- and reaffirms bets that the Bank of Japan (BoJ) will not pivot away from negative interest rates in January. Finally, the rupee ended at 83.03 (Provisional), stronger by 10 paise from its previous close of 83.13 on Tuesday.

The FIIs as per Wednesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 10257.37 crore against gross selling of Rs 10794.43 crore, while in the debt segment, the gross purchase was of Rs 1872.41 crore with gross sales of Rs 430.82 crore. Besides, in the hybrid segment, the gross buying was of Rs 20.09 crore against gross selling of Rs 17.04 crore.

The US markets ended higher on Wednesday ahead of key inflation readings and bank earnings. Asian markets are trading mostly in green on Thursday with Japan's Nikkei extending its record-breaking rally on dovish BOJ bets. Indian markets managed to end Wednesday's highly volatile session with decent gains as heavyweights Reliance Industries, ICICI Bank, HDFC Bank and HCL Tech lent support in the fag end. Today, markets are likely to make flat-to-positive start tracking gains in global markets and ahead of the weekly F&O expiry. Trading activity likely to remain subdued due to the beginning of the corporate earnings season after market hours. India's top IT firms will kick off December quarter earnings, with TCS and Infosys to report numbers later in the day. The Street expects IT companies' third quarter (Q3) earnings to remain subdued because of seasonal furloughs and continued cuts in discretionary spending by clients. Sentiments will get a boost as Finance Minister Nirmala Sitharaman said India will become the third largest economy by 2027-28, with a GDP of over $5 trillion. Some optimism will come as a PHDCCI report noted that India's economy is likely to surpass $4 trillion in 2024-25 and further escalate to $5 trillion by 2026-27. The industry chamber also expects the RBI to cut the repo rate by 100 basis points in a calibrated manner by the end of 2024. Observing that despite global challenges, India's economy remains resilient, the report said the country is poised to attain the status of a developed economy by 2047 under the initiative of Viksit Bharat. Some support will come as State Bank of India chairman Dinesh Kumar Khara termed the 7.3 per cent growth estimate for the country for FY24 as a very positive development. Traders may take note of Foreign Secretary Vinay Kwatra's statement that India and the United Arab Emirates have signed a deal to explore the establishment of grid connectivity between the two countries. Kwatra said the deal is part of a total of four memorandums of understanding signed between New Delhi and Abu Dhabi in the ongoing Vibrant Gujarat Global Summit. He said one of the pacts is on renewable energy, which also includes green hydrogen and solar. However, foreign fund outflows may dampen sentiments. Provisional data from the NSE showed that foreign institutional investors (FIIs) sold shares worth Rs 1,721.35 crore on January 10. Meanwhile, India has imposed anti-dumping duties on three Chinese products -- wheel loaders, gypsum tiles, and industrial laser machinery -- for five years to guard local manufacturers from cheap imports from the neighbouring country. There will be some reaction in stocks related to coal industry as the National Coal Index (NCI) dropped 17.54 per cent to 155.09 points in November 2023 indicating sufficient coal availability in the market. The NCI was at 188.08 points in November 2022. This shows a strong supply of coal in the market, with sufficient availability to meet the growing demand.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,618.70

21,497.61

21,690.81

BSE Sensex

71,657.71

71,267.84

71,890.70

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

272.14

134.15

132.60

135.20

Power Grid

168.72

238.40

236.90

241.00

ONGC

165.01

212.80

210.00

215.30

NTPC

144.55

313.40

307.69

319.44

State Bank of India

127.42

622.00

618.36

625.46

  • ONGC's wholly-owned subsidiary -- ONGC Videsh has incorporated a wholly owned subsidiary namely OVL Overseas IFSC in GIFT City, Gujarat.
  • State Bank of India has concluded the issue of $600 million senior unsecured fixed rate notes having maturity of 5 years at a coupon of 5 per cent, payable semi-annually, under Regulation-S.
  • LTIMindtree has launched its SaaS based hybrid cloud management platform Canvas CloudXperienz.
  • Maruti Suzuki India has inked Non biding MoU with the State of Gujarat for construction of a new automobile production plant.

News Analysis