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Market Commentary 14 June 2024
Benchmarks likely to get cautious start amid mixed global cues

Indian equity benchmarks ended Thursday's trading session on a positive note, backed by gains in Realty, Capital Goods and Consumer Durables stocks. After an initial gap-up, the markets wiped off some of their gains in the opening trade itself amid slight fall in industrial growth. The Index of Industrial Production (IIP) moderated to 5 per cent in April from an upwardly revised figure of 5.4 per cent in the preceding month. However, key gauges managed to trade in green throughout the day as government data showed Retail inflation continued its downward slide to reach a one-year low of 4.75 per cent in May due to a marginal decline of prices in the food basket and remained within the Reserve Bank's comfort zone of below 6 per cent. Besides, foreign fund inflows also aided domestic sentiments. Foreign institutional investors (FIIs) were net buyers of stocks worth Rs 426.63 crore on June 12. Markets maintained their gains in second half of trading session, taking support from ICRA Executive Vice President and Chief Ratings Officer K Ravichandran' statement that the PLI scheme is expected to attract investments of Rs 3-4 trillion in the next four years and generate 200,000 jobs as large projects in sectors, including semiconductor, solar module and pharmaceutical intermediaries, are expected to take off. He said that going ahead private sector capex is expected to pick up in oil and gas, metals and mining, hospitals, healthcare and cement sectors. Sentiments remained optimistic as the Reserve Bank of India (RBI) in its latest data report on ‘Overseas Direct Investment' has showed that the country's outward foreign direct investment (OFDI) commitments increased 1.04% at $2009.51 million in May 2024 as compared to $1988.8 million in May 2023. These OFDI commitments were $2782.61 million in the month of April 2024. According to the report, the equity commitments rose 6.51% to $1028.76 million in May 2024 from $965.86 million a year ago. Finally, the BSE Sensex rose 204.33 points or 0.27% to 76,810.90, and the CNX Nifty was up by 75.95 points or 0.33% points to 23,398.90.

The US markets ended mostly higher on Thursday after a report released by the Labor Department showed producer prices in the U.S. unexpectedly edged lower in the month of May. The Labor Department said its producer price index for final demand dipped by 0.2 percent in May after climbing by 0.5 percent in April. Street had expected producer prices to inch up by 0.1 percent. The report also said the annual rate of producer price growth slowed to 2.2 percent in May from an upwardly revised 2.3 percent in April. Street had expected the annual rate of producer price growth to accelerate to 2.5 percent from the 2.2 percent originally reported for the previous month. The unexpected monthly dip by producer prices largely reflected a sharp pullback by energy prices, which plunged by 4.8 percent in May after surging by 2.0 percent in April. The steep drop in energy prices contributed to a 0.8 percent decrease in prices for goods, although prices for goods rose by 0.3 percent when excluding food and energy prices. Meanwhile, the Labor Department said prices for services came in unchanged, as a 1.4 percent slump by prices for transportation and warehousing services offset upticks in prices for trade and other services. The report also said core producer prices, which exclude prices for foods, energy, and trade services, were unchanged in May after climbing by 0.5 percent in April. On the sectoral front, Semiconductor and computer hardware stocks showed strong moves to the upside on the day, contributing to the modest gain posted by the tech-heavy Nasdaq. Reflecting the strength in the sectors, the Philadelphia Semiconductor Index and the NYSE Arca Computer Hardware Index climbing by 1.5 percent and 1.4 percent, respectively. Within the semiconductor sector, shares of Broadcom (AVGO) soared by 12.3 percent after the chipmaker reported better than expected fiscal second quarter results and announced a 10-for-1 stock split.

Crude oil futures ended marginally higher on Thursday amid expectations of increased demand for oil. However, recent data showing a jump in U.S. crude inventories limited the upside in oil prices. The International Energy Agency's forecast of a surplus petroleum production of up to eight million barrels per day by 2030 and the higher-for-longer Fed rate outlook also weighed on prices. Benchmark crude oil futures for July delivery rose by $0.12 or 0.15% to settle at $78.62 a barrel on the New York Mercantile Exchange. Brent crude for August delivery was up $0.15 or about 0.18% to $82.75 per barrel on London's Intercontinental Exchange.

Indian rupee settled lower on Thursday even as both the domestic equity benchmark indices touched all-time high levels. Sentiments were down beat as India's industrial production growth measured in terms of the Index of Industrial Production (IIP) slipped to 3-month low of 5 per cent in April 2024, as compared with a revised estimate of 5.4% in March, mainly due to poor show by the manufacturing sector, though mining and power segments performed well. Investors overlooked the report that Consumer Price Index (CPI) based retail inflation continued its downward slide to reach 12-month low of 4.75 per cent in May as compared to 4.83 per cent in April 2024, due to a marginal decline of prices in the food basket. On the global front, the dollar edged up on Thursday, recovering some of the losses sparked by softer than expected U.S. inflation data on Wednesday, after the Federal Reserve forecast just one rate cut this year. Finally, the rupee ended at 83.54 (Provisional), weaker by 6 paise from its previous close of 83.48 on Wednesday.

The FIIs as per Thursday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 15752.26 crore against gross selling of Rs 15072.93 crore, while in the debt segment, the gross purchase was of Rs 3354.87 crore with gross sales of Rs 1262.95 crore. Besides, in the hybrid segment, the gross buying was of Rs 25.51 crore against gross selling of Rs 16.65 crore.

The US markets ended mostly higher on Thursday driven by a continued rally in technology shares. Asian markets are trading mixed on Friday ahead of the Bank of Japan's rate cut decision that is due today. Indian markets ended slightly higher on Thursday, after hitting record highs earlier in the session. Today, markets are likely to get cautious start amid mixed global cues. Market may witness some profit-taking owing to the extended weekend factor. Equity market will be closed for trading on Monday on account of Bakri Id holiday. Foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) were net sellers of stocks worth Rs 3,033 crore on June 13. However, credit rating agency Moody's Ratings said fuelled by domestic demand growth, India is expected to remain the region's fastest-growing economy in the Asia-Pacific region in the second half of the year 2024. The report also noted that India, Indonesia, and the Philippines were the key growth outperformers in the first half of the year 2024. Some support will come as industry body CII made a case for pushing reforms in sectors like land, labour, and agriculture by the Modi 3.0 government to accelerate economic growth, which is estimated to be around 8 per cent in the current financial year. CII President Sanjiv Puri said a lot of policy interventions in the past have put the economy on a much stronger wicket. Economic think tank Global Trade Research Initiative (GTRI) said implementation of key strategic reforms such as simplification of customs duty structure, GST, and not incentivising low value-added electric vehicles would help India ensure its sustainable development and inclusive growth. It also said that India is standing on the cusp of a transformative era and there is an urgent need for comprehensive economic reforms. Traders may take note of a private report that fiscal deficit of the 20 largest states is expected to be 2.8 per cent of gross domestic product (GDP) in FY25 compared to the budgeted 3.2 per cent of GDP, as expenditure growth is expected to moderate during the year. Edible oil industry stocks will be in focus with report that the imports of edible oils – palm, soybean and sunflower - declined by 5% to 8.67 million tonne (MT) in first seven months of the 2023-24 oil year (November-October) compared to the same period last oil year. There will be some reaction in gaming industry stocks as the Goods and Services Tax (GST) Council is likely to consider a review of 28% tax on online gaming and clarification on several procedural matters at its next meeting on June 22 in the national capital. Investors will be eyeing WPI data to be out later in the day.

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

Index

Previous close

Support

Resistance

NSE Nifty

23,398.90

23,341.51

23,468.66

BSE Sensex

76,810.90

76,638.58

77,064.34

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

366.69

182.50

180.64

184.23

HDFC Life

243.52

591.00

571.20

604.60

ONGC

160.13

276.90

273.60

279.10

State Bank of India

125.24

844.95

838.74

848.54

ICICI Bank

124.94

1110.30

1102.46

1120.66

  • Dr. Reddy's Laboratories' wholly-owned subsidiary -- Dr Reddy's Laboratories Inc and Ingenus Pharmaceuticals, LLC have entered into license agreement.
  • Nestle India's Board has approved continuation of payment of general licence fees (royalty) at the current rate of 4.5% to Swiss parent Societe des Produits Nestle S.A. (Licensor).
  • The Financial Intelligence Unit has slapped a fine of more than Rs 1.66 crore on Axis Bank for failing to put in place a mechanism to detect and report suspicious transactions.
  • L&T has secured an order from the ONGC for its hydrocarbon vertical (L&T Energy) for Daman Upside Development Project-Wellhead Platforms & Pipelines, off India's west coast.

News Analysis