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Market Commentary 12 June 2024
Benchmarks to get flat-to-negative start ahead of IIP, CPI data

Indian equity benchmarks gave up day's gains and ended flat on Tuesday as investors remained on sidelines ahead of the India's Consumer Price Index (CPI) inflation and Index of Industrial Production (IIP) data to be out tomorrow. After making slightly positive start, markets turned cautious amid a private report stated that India consumer inflation likely snapped a four-month downward trend in May due to rapidly rising food costs, suggesting the Reserve Bank of India is still several months away from cutting interest rates. But markets soon gained traction and traded higher for most part of the session, as traders took support with data showing that foreign institutional investors (FIIs) extended their buying on the second day on June 10 as they bought Indian equities worth Rs 2,572.38 crore.  Some support also came as Finance Ministry announced the release of an additional installment of tax devolution to states for June 2024, in a move to support state finances and spur economic development. The total amount released to states for June now stands at Rs 1,39,750 crore. Sentiments remained optimistic in afternoon deals, taking support from Industry body Confederation of Indian Industry's statement that continuity in policy reforms under the leadership of Prime Minister Narendra Modi is likely to drive India towards the goal of becoming a developed nation. Traders took note of private report that India is expected to sustain a potential growth rate of 6.5 per cent -7 per cent year-on-year (Y-o-Y) between 2025-26 and 2029-30. However, the benchmark indices gave up gains towards end of the trading session and ended flat on profit booking in the absence of fresh triggers. Weak global cues further weighed on domestic market sentiment. Finally, the BSE Sensex fell 33.49 points or 0.04% to 76,456.59, and the CNX Nifty was up by 5.65 points or 0.02% points to 23,264.85.

The US markets ended mostly in green on Tuesday with Nasdaq settling over 150 points. The advance by the tech-heavy Nasdaq was partly due to a surge by shares of Apple (AAPL), with the tech giant surging by 7.3 percent to a record after unveiling new AI features that may drive users to upgrade their devices. Meanwhile, traders continued to look ahead to two potentially major market moving economic events on Wednesday. Market attention was shifting to the U.S. Federal Reserve's latest rate decision and May's consumer price index, which will be released Wednesday. The U.S. inflation data could be a key test for markets, especially after Friday's strong jobs report continued to suggest the central bank could hold off on lowering rates. On the sectoral front, banking stocks moved sharply lower, dragging the KBW Bank Index down by 2.0 percent to its lowest closing level in nearly two months. Considerable weakness was also visible among housing stocks, as reflected by the 1.4 percent loss posted by the Philadelphia Housing Sector Index. Airline stocks also showed a significant move to the downside on the day, with the NYSE Arca Airline Index falling by 1.4 percent. Brokerage, gold and steel stocks also moved notably lower, while strength among software, computer hardware and networking stocks contributed to the advance by the Nasdaq.

Crude oil futures ended higher on Tuesday after the Organization of Petroleum Exporting Countries (OPEC) in its Monthly Oil Market Report maintained its demand forecast for the year at 2.2 million barrels per day over 2023 levels, and its 1.2 million bpd forecast for production gains from non-OPEC nations. Meanwhile, the Energy Information Administration (EIA) said in its report that it expects demand to average 1.1 million barrels per day in 2024. Benchmark crude oil futures for July delivery higher $0.16 or 0.20% to settle at $77.90 a barrel on the New York Mercantile Exchange. Brent crude for August delivery was up $0.29 or about 0.39% to $81.92 per barrel on London's Intercontinental Exchange.

Indian rupee ended lower against the U.S. dollar on Tuesday weighed down by a muted trend in domestic equities and the strength of the American currency in overseas markets. Traders were cautious with a private report that India consumer inflation likely snapped a four-month downward trend in May due to rapidly rising food costs, suggesting the Reserve Bank of India is still several months away from cutting interest rates. Investors overlooked reports that foreign institutional investors (FIIs) extended their buying on the second day on June 10 as they bought Indian equities worth Rs 2,572.38 crore. On the global front, the dollar hovered near a one-month peak against the euro and pushed to a one-week high versus the yen on Tuesday as traders braced for crucial U.S. inflation data and fresh Federal Reserve interest rate forecasts the following day. Finally, the rupee ended at 83.59 (Provisional), weaker by 9 paise from its previous close of 83.50 on Monday.

The FIIs as per Tuesday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 13889.79 crore against gross selling of Rs 11021.92 crore, while in the debt segment, the gross purchase was of Rs 1542.18 crore with gross sales of Rs 1689.79 crore. Besides, in the hybrid segment, the gross buying was of Rs 11.82 crore against gross selling of Rs 4.79 crore.

The US markets ended mostly higher on Tuesday led by a sharp rally in Apple shares. Asian markets are trading mostly in red on Wednesday after China's May inflation rate came in at 0.3%, missing expectations of 0.4% by street. The figure was unchanged from April. Indian markets erased all their initial gains and ended lower on Tuesday on account of last leg selling pressure amid weak global cues. Today, markets are likely to get flat-to-negative start amid mixed global cues. Investors are eyeing the upcoming decision by the US Federal Reserve, scheduled for Wednesday. Also, domestically, investors are looking for the Index of Industrial Protection (IIP) and Consumer Price Index (CPI) data to be out later in the day for more directional cues. There are expectations that India's inflation rate is likely to experience a marginal increase to around 5 per cent. Foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) were net sellers of stocks worth Rs 111 crore on June 11. However, some respite may come as a world bank report stated that India will remain the fastest-growing major economy recording a steady growth of 6.7 per cent in the next three years including the current financial year. According to the World Bank's latest Global Economic Prospects report, in India, growth is estimated to have picked up to 8.2 per cent in fiscal year (FY) 2023/24 (April 2023 to March 2024) - 1.9 percentage points higher than estimated in January. Some support will come as exports from special economic zones (SEZs) rose by over 4 per cent to $163.69 billion in 2023-24 even though the country's total shipments dipped by more than 3 per cent in the last fiscal. According to the data of the commerce ministry, exports from these zones stood at $157.24 billion in 2022-23 and $133 billion in 2021-22. There will be some buzz in the metal stocks as India Ratings and Research (Ind-Ra) said the steel demand is expected to grow in the range of 9-12 per cent during the ongoing 2024-25 fiscal. As per the report, the demand will be supported by steady growth in the end-user industries such as automobile and infrastructure sectors. Automobile industry stocks will be in focus after industry body SIAM said passenger vehicle wholesales in India increased 4 per cent year-on-year in May to 347,492 units, as compared to the same month last year. Overall passenger vehicle (PV) dispatches from companies to dealers stood at 334,537 units in May 2023. There will be some reaction in paint industry stocks as a CRISIL report stated that the organized paints sector in India is on the cusp of significant expansion, with production capacity expected to nearly double to about 7.8 billion litres per annum (blpa) by fiscal 2027. As per the report, this surge will be fuelled by investments amounting to around Rs 19,000 crore, including significant contributions from a new major player entering the market. Meanwhile, Shares of EV (electric vehicle) will be in limelight after Ola Electric received Sebi approval for its Rs 7,250 crore IPO.

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

Index

Previous close

Support

Resistance

NSE Nifty

23,264.85

23,184.51

23,367.31

BSE Sensex

76,456.59

76,215.17

76,779.26

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

555.56

181.60

180.15

183.40

ONGC

472.70

273.90

267.76

277.51

Tata Motors

148.29

986.15

971.01

996.91

HDFC Bank

147.73

1563.05

1553.16

1571.96

State Bank of India

147.54

835.50

829.84

840.39

  • LTIMindtree has inaugurated regional headquarters in Saudi Arabia's capital, Riyadh, as part of the expansion in KSA and the Middle East.
  • Tata Consultancy Services has launched the Bringing Life to Things Lab in Cincinnati, Ohio.
  • State Bank of India is planning for long term fund raising in single / multiple tranches of up to $3 billion under Reg-S/144A.
  • HCL Technologies and Deutsche Apotheker- und Arztebank eG (apoBank) have expanded its strategic partnership.

News Analysis