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Market Commentary 12 December 2022
Benchmarks likely to open in red ahead of IIP, CPI data

 

Indian equity benchmarks ended lower by over half percent on Friday pressured by heavy selling in IT, Tech and Realty stocks despite a positive trend in the global markets. Key gauges made slightly positive start, as traders took some support with report that India Inc expects private capex to gain further momentum in the short to medium term, as it sees green shoots of revival in sectors like real estate, construction, logistics and chemicals, among others. But, markets soon reversed gains and slipped into red terrain, as rising crude oil prices and relentless foreign capital outflows weighed on sentiment. As per exchange data, Foreign Institutional Investors (FIIs) were net sellers in capital markets as they offloaded shares worth Rs 1,131.67 crore on Thursday. Indian indices came under heavy selling pressure in the second half as sentiments got hit with a private report that the Reserve Bank of India's curb on securitising loans having residual maturity of less than 365 days may hit the sale of short-term advances like micro-finance, personal loans and gold loans for a while. Traders paid no heed towards report stated that India consumer price inflation likely cooled to a nine-month low of 6.40% in November mainly due to a moderation in food prices. Traders also took a note of Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Piyush Goyal's statement that India will have to face global competition effectively to achieve the goal of becoming a prosperous and developed nation. Finally, the BSE Sensex fell 389.01 points or 0.62% to 62,181.67 and the CNX Nifty was down by 112.75 points or 0.61% to 18,496.60.

 

The US markets ended lower on Friday as traders looked ahead to next week's highly-anticipated Federal Reserve meeting. While the Fed is widely expected to slow the pace of interest rate hikes to 50 basis points, traders have recently expressed concerns about how much further the Fed will need to raise rates in order to contain inflation. Traders may pay close attention to the Fed's accompanying statement, although a lot of key data will be released before the next meeting in late January/early February. Adding to concerns about the outlook for interest rates, the Labor Department released a report showing U.S producer prices increased by more than expected in the month of November. The Labor Department said its producer price index for final demand rose by 0.3 percent in November, matching upwardly revised increases in October and September.  Street had expected producer prices to inch up by 0.1 percent compared to the 0.2 percent uptick originally reported for the previous month. On the sectoral front, energy stocks moved sharply lower over the course of the session, with a continued decrease by the price of crude oil weighing on the sector. With crude for January delivery falling $0.44 to $71.02 a barrel, the Philadelphia Oil Service Index plunged by 3.8 percent and the NYSE Arca Oil Index dove by 2.2 percent. Considerable weakness also emerged among biotechnology stocks, as reflected by the 1.7 percent slump by the NYSE Arca Biotechnology Index.

 

Crude oil futures ended lower in volatile trading on Friday as growing recession fears negated any supply woes after weak economic data from China, Europe and the United States. It is feared that demand from China will likely see a drop due to the impact of Covid-19 infections, although the country has loosened some of the restrictions imposed. Meanwhile, traders looked ahead to the monetary policy meetings of the U.S. Federal Reserve, the Bank of England and the European Central Bank, due next week. Benchmark crude oil futures for January delivery fell $0.44 or 0.6 percent at $71.02 a barrel on the New York Mercantile Exchange. Brent crude for February delivery lost $0.05 to settle at $76.10 a barrel on London's Intercontinental Exchange.

 

Indian rupee settled higher against dollar for third consecutive day on persistent selling of the American currency by exporters. Sentiments were upbeat with report that India Inc expects private capex to gain further momentum in the short to medium term, as it sees green shoots of revival in sectors like real estate, construction, logistics and chemicals, among others. Besides, private report stated that India consumer price inflation likely cooled to a nine-month low of 6.40% in November mainly due to a moderation in food prices. On the global front, dollar was broadly flat against major currencies on Friday as jitters reemerged about the health of the U.S. economy, and ahead of producer inflation data later in the day and a Federal Reserve meeting on interest rates next week. Finally, the rupee ended at 82.28 (Provisional), stronger by 10 paise from its previous close of 82.38 on Thursday.

 

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 9037.57 crore against gross selling of Rs 9816.62 crore, while in the debt segment, the gross purchase was of Rs 527.31 crore against gross selling of Rs 113.52 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.67 crore against gross selling of Rs 3.93 crore.

 

The US markets ended lower on Friday as a measure of consumer sentiment exceeded expectations in December and producer price data for November indicated that inflation is stickie than most assume, complicating the Fed's task to slow the pace of its rapid interest-rate hikes. Asian markets are trading in red on Monday as investors looked ahead to a trio of central bank interest-rate decisions this week. Indian markets ended lower on Friday amid weakness in information and technology (IT) sector stocks coupled with selling by foreign portfolio investors (FPIs). Today, markets are likely to open lower on the first trading day of the week amid largely negative cues from global markets. Investors await the country's November retail inflation data, October's industrial production (IIP) data set to be released later in the day. Moreover, investors awaited a slew of rate decisions from the US Federal Reserve, the European Central Bank (ECB) and others. Foreign fund outflows likely to dent sentiments in the markets. Foreign institutional investors sold a net of Rs 158.01 crore equities on Friday as per provisional NSE data. Also, FPIs turned sellers in the last four trading sessions and pulled out Rs 3,300 crore as they are adopting a cautious stance ahead of the US Federal Reserve's decision on the interest rate. However, some support may come later in the day as the Reserve Bank of India's (RBI) statistical supplement showed India's foreign exchange reserves rose for a fourth week to an over three-month high of $561.16 billion in the week through December 2. Traders may take note of report that the government has asked trade bodies and banks to explore opportunities for trade in rupee with more countries after having facilitated rupee trade with Russia, Mauritius and Sri Lanka. Besides, the sixth round of negotiations between senior officials of India and the UK for a proposed free trade agreement (FTA) will begin on Monday with an aim to conclude the talks at the earliest, an official said. The negotiations are happening after a brief gap due to recent political developments in the UK. There will be some buzz in the power stocks as latest government data showed that power deficit, or the gap between electricity required and supplied, has fallen from 2 per cent in April this year to 0.2 per cent in November 2022. Aviation industry stocks will be in focus as IATA chief Willie Walsh said the Indian civil aviation market has exciting and significant opportunities but taxation has always been an issue which also makes the industry less competitive. There will be some reaction in col industry stocks as India's thermal coal imports fell to the lowest levels in 9 months during November, data from consultancy Coalmint showed, mainly due to a rise in domestic coal production. Besides, Sula Vineyards and Abans Holdings IPO will open for subscription today. Meanwhile, shares of Uniparts India will debut on the bourses today.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

18,496.60

18,382.90

18,637.50

BSE Sensex

62,181.67

61,802.04

62,648.35

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

356.64

110.40

108.81

112.86

HCL Technologies

124.14

1029.80

1,008.66

1,062.96

State Bank of India

112.02

617.00

611.40

620.30

Tata Motors

99.20

413.20

408.19

419.59

ICICI Bank

95.75

930.25

925.26

935.01

 

  • IndusInd Bank has tied-up with non-banking finance company SV Credit Line for a co-lending agreement for Rs 500 crore loan exclusively to women borrowers. 
  • Adani Enterprises has acquired 10,000 (100%) equity shares of Rs 10 each of Alluvial Mineral Resources from Adani Infra (India) on December 07, 2022. 
  • Larsen & Toubro's wholly owned subsidiary -- Larsen & Toubro International FZE has entered into a Share Purchase Agreement to purchase stake in OPRO.AI INC. 
  • Hindustan Unilever has forayed into the Health & Wellbeing category through strategic investments in Zywie Ventures (OZiva) and Nutritionalab (Wellbeing Nutrition).
News Analysis