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Market Commentary 11 July 2022
Benchmarks likely to get negative start amid weak Asian cues

 

Indian equity benchmarks extended gains to the third session in a row on Friday amid gains in Capital Goods, Power, Utilities and Industrials shares. Strength across global markets after the Fed hinted at a more tempered program of hikes in COVID-era interest rates aided the sentiment on Dalal Street. Key gauges made an optimistic start and stayed in green for whole day, as sentiments got a boost with Economic Affairs Secretary Ajay Seth's statement that 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. Some support also came with a private report stating that roles in Indian research and development (R&D) increased 42 per cent in the last three years. Job postings in R&D also grew by over 40 per cent between May 2020 and 2021. Among job seekers, searches for roles in R&D increased 21 per cent in the last three years. Markets continued to trade in fine fettle in late afternoon session, taking support from private report stated that the Indian job market registered marginal year-on-year growth of 3 percent across industry segments in June. It said banking, financial services and insurance (BFSI), travel and tourism and chemical industries ramped up hiring compared to the same month last year. Traders took note of report that 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. However, upside remain capped amid persistent foreign fund outflows in the capital market. Foreign Institutional Investors (FIIs) were net sellers in the capital market on Thursday as they offloaded shares worth Rs 925.22 crore. Finally, the BSE Sensex rose 303.38 points or 0.56% to 54,481.84 and the CNX Nifty was up by 87.70 points or 0.54% to 16,220.60.

 

The US markets ended choppy trading session mostly lower on Friday following the release of a closely watched Labor Department showing stronger than expected U.S. job growth in the month of June. The data eased worries about the economy while also adding to concerns about aggressive interest rate hikes by the Federal Reserve. The Labor Department said non-farm payroll employment jumped by 372,000 jobs in June after surging by a revised 384,000 jobs in May. Street had expected employment to increase by 268,000 jobs compared to the addition of 390,000 jobs originally reported for the previous month. The stronger than expected job growth reflected notable job gains in professional and business services, leisure and hospitality, and healthcare. Meanwhile, the report showed the unemployment remained at 3.6 percent for the fourth month in a row, matching street estimates. On the sector front, most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets. Tobacco stocks showed a substantial move to the downside, however, with the NYSE Arca Tobacco Index plunging by 3.4 percent to its lowest closing level in well over a year. Telecom and steel stocks also saw some weakness on the day, while strength was visible among brokerage and housing stocks. Meanwhile, investors were looking ahead reports on consumer and producer price inflation, which could impact the outlook for interest rates. Reports on retail sales, industrial production and consumer sentiment are also on investors' radar. Traders are also eyeing quarterly results from financial giants JPMorgan Chase (JPM), Morgan Stanley (MS), Citigroup (C) and Wells Fargo (WFC).

 

Extending their gains for second straight session, crude oil futures ended significantly higher on Friday, after data showed a stronger-than-expected addition of jobs in the U.S. in the month of June. Data released by the Labor Department today showed non-farm payroll employment jumped by 372,000 jobs in June after surging by a revised 384,000 jobs in May. Street had expected employment to increase by 268,000 jobs compared to the addition of 390,000 jobs originally reported for the previous month. Meanwhile, a report from Baker Hughes said the number of active U.S. rigs drilling for oil rose by two to 597 this week, rising for a fifth straight week. The total active U.S. rig count, include those drilling for natural gas, also climbed by two to 752. Benchmark crude oil futures for August delivery rose $2.06 or 2 percent to settle at $104.79 a barrel on the New York Mercantile Exchange. Brent crude for September delivery surged $2.37 or 2.3 percent to settle at $107.02 (Provisional) a barrel on London's Intercontinental Exchange.

 

Indian rupee continued its declining trend against dollar on Friday. Sentiments were fragile as FPIs have dumped Indian shares worth Rs 50,203 crore in June. It is the highest net outflow in over two years. Traders ignored Economic Affairs Secretary Ajay Seth's statement that 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. On the global front, safe-haven demand briefly lifted the yen on Friday after former Japanese Prime Minister Shinzo Abe was shot while campaigning for a parliamentary election. Finally, the rupee ended at 79.21 (provisional), weaker by 8 paisa from its previous close of 79.13 on Thursday.

 

The FIIs as per Friday's data were net sellers in both equity and debt segment. In equity segment, the gross buying was of Rs 5799.15 crore against gross selling of Rs 6680.94 crore, while in the debt segment, the gross purchase was of Rs 59.26 crore against gross selling of Rs 81.37 crore. Besides, in the hybrid segment, the gross buying was of Rs 7.12 crore against gross selling of Rs 9.09 crore.

 

The US markets ended lower on Friday as stronger-than-expected jobs data helped ease growth worries but added to expectations of another 75-bps rate hike at the upcoming Fed meeting later this month. Asian markets are trading mostly in red on Monday as investors braced for a U.S. inflation report that could force another super-sized hike in interest rates. Indian markets ended higher for the third day on Friday, with the Sensex climbing over 300 points amid mixed global market trends. Today, markets are likely to make negative start amid weakness in Asian peers. There will be some cautiousness with a private report that India's headline retail inflation rate is expected to be 7 percent in June, largely unchanged from 7.04 percent in May, with a sharp pick-up in vegetable prices likely nullifying the impact of the decline in prices of other food items. Traders will be concerned as foreign investors continue to desert Indian equity markets and have pulled out over Rs 4,000 crore this month so far amid steady appreciation of the dollar and rising interest rates in the US. However, some respite may come later in the day as RBI Governor Shaktikanta Das exuded confidence that the price situation will gradually improve in the second half of the current fiscal, and the central bank would continue to take monetary measures to anchor inflation with a view to achieving strong and sustainable growth. Traders may take note of report that India must grow by at least 8-10 percent per year for the next 25 years if it wants to achieve its social and economic ambitions. Meanwhile, In a global first, the Securities and Exchange Board of India (Sebi) is planning to issue regular risk factor disclosures on market trends, including surges and collapses, to help investors make right decisions by learning from the regulator's insights. There will be some buzz in banking stocks with a private report stating that with increases in lending rates, high credit growth, and lower credit costs, banks are likely to report a significant rise in net interest income (NII) and profits year-on-year (YoY) in the quarter ended June 2022 (Q1FY23). Agriculture industry related stocks will be in focus as he agriculture ministry data showed the area under coverage for paddy declined 24 per cent to 72.24 lakh hectares so far in the ongoing Kharif sowing season, while oilseeds acreage is lower by 20 per cent at 77.80 lakh hectares because of delay in the progress of monsoon rains in some parts of India. There will be some reaction sugar industry stocks as the government said India has extended by two weeks a deadline for the export of 800,000 tonnes of sugar as annual monsoon rains make it tough for many producers to move stocks from factories to ports.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

16,220.60

16,160.50

16,278.10

BSE Sensex

54,481.84

54,298.02

54,646.39

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Oil and Natural Gas Corporation

427.78

121.65

119.65

125.00

Hindalco Industries

255.06

355.70

348.54

365.44

Tata Motors

237.30

440.50

431.91

446.46

NTPC

153.75

143.50

141.60

144.80

Coal India

146.47

189.50

187.06

191.91

 

  • Coal India's subsidiary -- Northern Coalfields has dispatched 3.83 lakh tonnes of coal to electricity generating plants on July 7, 2022, the highest amount of dry fuel in a single day since the inception of the company. 
  • The USFDA has completed a Pre-Approval Inspection and issued Form 483 with two observations to Dr. Reddy's Laboratories.
  • Axis Bank has entered into MoU with the Indian Air Force to manage salary accounts of the defense personnel. 
  • Tata Motors' wholly owned subsidiary -- Jaguar Land Rover has reported a 37 per cent decline in retail sales at 78,825 units in Q1FY23.
News Analysis