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Market Commentary 13 May 2024
Markets to get cautious start amid mixed global cues; CPI data eyed

Indian equity benchmarks ended in positive territory on Friday following upbeat trends in global markets. Markets made a positive start and remained in green throughout the day as traders took support after the Export-Import Bank of India forecasted India's merchandise exports to grow 12.3% on-year at $116.7 billion in the April-June quarter of FY25, on strong economic fundamentals and sustained manufacturing and services activity. Some support also came with a private report that India's retail market is poised to surpass $2.2 trillion by 2030, with approximately 90 per cent of sales expected to occur offline. The report also finds that a substantial portion of all purchases will be influenced by what consumers see online. Adding to the optimism, a recent report by the Ministry of Commerce said India's exports have increased to as many as 115 countries out of the total 238 destinations during 2023-24 despite the global economic uncertainties. These 115 export destinations, which account for 46.5 per cent of India's export basket, include the US, UAE, Netherland, China, UK, Saudi Arabia, Singapore, Bangladesh, Germany and Italy. However, gains remain capped as some pessimism remained among traders with report that as India's general election reaches halfway, declining voter turnout sparks concerns about disengagement in the world's largest poll. The decrease raises questions about the ruling Bharatiya Janata Party's support, causing uncertainty in financial markets. Some concern also came with private report stating that the Indian private equity and venture capital investments declined by about 35 per cent to around $39 billion in 2023 from $62 billion in 2022. The private equity (PE) investments in India dropped by 18 per cent to $29.6 billion from a peak value of $36 billion in 2022. The drop in VC investments was much sharper, with total investments at $9.6 billion in 2023 versus $25.7 billion in 2022. Besides, provisional data from the exchanges showed foreign institutional investors continued selling Indian equities as they net sold Rs 6,994.86 crore worth of shares on May 9, 2024.  Also, traders remained on sidelines ahead of India's Index of Industrial Production (IIP) data to be out later in the day. Finally, the BSE Sensex rose 260.30 points or 0.36% to 72,664.47, and the CNX Nifty was up by 97.70 points or 0.44% points to 22,055.20.

The US markets ended mostly in green on Friday. The strength on markets partly reflected recently renewed optimism about the outlook for interest rates. Recent data has pointed to some softness in the U.S. labor market, increasing investor confidence the Federal Reserve will lower interest rates in the coming months. However, buying interest was partly offset by the release of a report from the University of Michigan showing a substantial deterioration in U.S. consumer sentiment in the month of May. The University of Michigan said its consumer sentiment index plunged to 67.4 in May from 77.2 in April. Street had expected the index to edge down to 76.0. With the much steeper than expected drop, the consumer sentiment index tumbled to its lowest level since hitting 61.3 last November. The report also showed a notable increase in year-ahead inflation expectations, which jumped to 3.5 percent in May from 3.2 percent in April, reaching the highest level since hitting 4.5 percent last November. Long-run inflation expectations also inched up to 3.1 percent in May from 3.0 percent in April, remaining elevated relative to the 2.2-2.6 percent range seen in the two years pre-pandemic. On the sectoral front, most of the major sectors showed only modest moves on the day, contributing to the lackluster performance by the broader markets. Semiconductor stocks showed a strong move to the upside, however, with the Philadelphia Semiconductor Index climbing by 1.0 percent. Networking stocks also saw notable strength on the day, while energy stocks came under pressure amid a decrease by the price of crude oil.

Crude oil futures ended lower on Friday weighed down by concerns the Federal Reserve may keep interest rates higher for a longer period. A slightly stronger dollar weighed on oil prices. The greenback moved higher against its major counterparts in the New York session, as investors awaited the release of U.S. inflation data for April next week, which will guide the outlook for Fed rate cuts. Benchmark crude oil futures for June delivery fell $1.06 or about 1.34% to settle at $78.20 a barrel on the New York Mercantile Exchange. Brent crude for July delivery dropped $1.09 or 1.30% to $82.79 per barrel on London's Intercontinental Exchange.

Indian rupee traded in a very narrow range and ended marginally lower against the US dollar on Friday, as the support from positive domestic equities was negated by elevated crude oil prices. Traders remained cautious as provisional data from the exchanges showed foreign institutional investors continued selling Indian equities as they net sold Rs 6,994.86 crore worth of shares on May 9, 2024. However, losses remain capped as traders took some support as the Export-Import Bank of India forecast India's merchandise exports to grow 12.3% on-year at $116.7 billion in the April-June quarter of FY25, on strong economic fundamentals and sustained manufacturing and services activity. On the global front, the dollar steadied on Friday after losing ground overnight on the back of U.S. data showing further signs of a cooling labour market, while the yen dipped as investors pushed back after suspected intervention last week. Finally, the rupee ended at 83.51 (Provisional), weaker by 3 paise from its previous close of 83.48 on Thursday.  

The FIIs as per Friday'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 11524.71 crore against gross selling of Rs 18194.63 crore, while in the debt segment, the gross purchase was of Rs 1684.41 crore with gross sales of Rs 1481.27 crore. Besides, in the hybrid segment, the gross buying was of Rs 10.86 crore against gross selling of Rs 42.88 crore.

The US markets ended mostly in red on Friday amid signs of economic slowdown and persistent inflation. Asian markets are trading mixed on Monday due to slack in China and news of US President Joe Biden planning to increase tariffs on some Chinese goods. Indian markets ended higher on Friday, propelled by a rally in market heavyweights Reliance Industries, ITC and Bharti Airtel amid a supportive trend overseas. Today, markets are likely to get cautious start amid mixed global cues and ahead of India's retail inflation data to be out later in the day. Also, markets will track the fourth phase of the voting, going on today. Traders will be concerned amid foreign fund outflows. Indian markets have witnessed aggressive selling by Foreign Portfolio Investors (FPIs) in May, with a staggering amount of Rs 17,082 crores as per data by National Securities Depository. Weak macro-economic data likely to dent sentiments in the markets. The government data showed that India's industrial production growth slowed marginally to 4.9 per cent month-on-month in March 2024, mainly due to poor show by the mining sector. The factory output growth, measured in terms of the Index of Industrial Production (IIP), was 5.6 per cent in February 2024. However, some support will come as India's G20 Sherpa and former CEO of Niti Aayog Amitabh Kant projected that the country is all set to overtake Japan as 4th largest economy in the world by 2025, citing various macroeconomic parameters that are doing pretty well. The size of India's GDP is currently ranked 5th, after the US, China, Germany, and Japan. It overtook the UK in 2022. Besides, the new president of the Associated Chambers of Commerce and Industry of India (Assocham), Sanjay Nayar said India is in a great spot and could realise a growth rate of about 7.6% or more in 2024-25. Traders may take note of RBI data showing that post three consecutive weeks of decline, India's foreign exchange reserves rose again by $3.668 billion to $641.590 billion in the week that ended on May 3. There will be some buzz in the coal industry stocks with a private report that India's coal import rose by 7.7 per cent to 268.24 million tonne (MT) in FY24 driven by softness in seaborne prices and likelihood of increase in power demand during summer. The country's coal import was 249.06 MT in FY23. Space industry stocks will be in focus as ISRO Chairman S Somanath said the Indian space industry is offering a tremendous opportunity to the private sector in the country as a new area of growth and development. He said the union government envisages the space sector in the country to become a $9 to10 billion industry in the next 5-10 years from the current levels of 2 billion dollars. There will be some reaction in defence industry stocks with a private report that India's defence sector holds a lucrative ordering opportunity of $138 billion over FY24-32 amid the escalating demand for defence equipment, technologies, and services, offering significant prospects for companies engaged in defence production and technology development. Meanwhile, shares of Indegene will debut on the stock markets on May 13.

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

Index

Previous close

Support

Resistance

NSE Nifty

22,055.20

21,959.90

22,140.90

BSE Sensex

72,664.47

72,371.66

72,951.91

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

314.72

162.40

161.39

163.89

BPCL

220.82

618.80

606.25

626.65

SBIN

205.43

816.85

810.95

827.40

ITC

139.86

433.85

428.11

437.96

HDFC Bank

136.38

1439.85

1427.11

1452.26

  • Tata Steel has acquired 18,73,493 equity shares of Rs 10 each at an issue price of Rs 427.01 per share of The Indian Steel & Wire Products, a subsidiary company, on preferential basis, for an aggregate amount of around Rs 80 crore.
  • BPCL has reported 30.29% fall in its consolidated net profit at Rs 4,789.57 crore for fourth quarter ended March 31, 2024 as compared to Rs 6,870.47 crore for the same quarter in the previous year.
  • Tata Motors has reported over 3-fold jump in its consolidated net profit at Rs 17,528.59 crore for fourth quarter ended March 31, 2024 as compared to Rs 5,496.04 crore for the same quarter in the previous year.
  • Adani Enterprises' wholly owned subsidiary -- Adani Global, Mauritius has executed a Share Purchase and Shareholders' Agreement pursuant to which Adani Global has acquired 49% stake in a UAE based entity named Sirius Digitech from Sirius International Holding.

News Analysis