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Market Commentary 15 December 2021
Markets likely to make sluggish opening amid mixed global cues

 

In a volatile session, Indian equity benchmarks fell for the third day in a row on Tuesday, tracking weakness across global markets amid renewed concerns about the Omicron variant of COVID-19. Benchmarks started session on a negative note and stayed in red for whole day, as traders remained cautious with, as the state health department said Maharashtra on Monday reported two new patients infected with the new Omicron variant of SARS-CoV-2. Sentiments remained down-beat with a private report showed that foreign direct investment (FDI) into India in the July-September quarter of 2021-22 fell a sharp 42% on year at $13.5 billion from $23.4 billion a year ago. Some pessimism also came as preliminary data from the statistics ministry showed India's inflation accelerated again in November, driven by steep increases in food and fuel prices. The consumer price index rose 4.91 percent year-on-year following a 4.48 percent increase in the previous month. Street had forecast 5.10 percent inflation. A year ago, inflation was 6.93 percent. However, indices erased most of their early losses in afternoon session, as traders found some solace with estimates by Export-import Bank of India showed that India's merchandise exports are expected to grow by 51 per cent to about $303.98 billion in nine months ending December 2021 over the same period in 2020. Some support also came with NITI Aayog CEO Amitabh Kant's statement that the government will continue to push for greater reforms across sectors. Kant stated India is determined to carry out reforms. We need more and more reforms and the government will push for greater levels of reforms across sectors and make things easy and simple. However, markets failed to hold recovery and ended lower, as some pessimism remained among traders with data showing that India's inflation based on wholesale price index (WPI) jumped to 14.23% in the month of November as against 12.54% in October. The annual rate of inflation is 14.23% (Provisional) for the month of November 2021 as compared to 2.29% in November 2020. Finally, the BSE Sensex fell 166.33 points or 0.29% to 58,117.09 and the CNX Nifty was down by 43.35 points or 0.25% to 17,324.90.

 

The US markets settled in red, following the sharp pullback seen in the previous session, as some large tech stocks moved lower. Concerns about the outlook for monetary policy continued to weigh on the markets, as the Federal Reserve's two-day meeting got underway. With inflation remaining at an elevated rate, the Fed is widely expected to accelerate its timetable for reducing bond purchases. The Labor Department released a report showing producer prices increased by more than expected in the month of November. The report said the producer price index for final demand advanced by 0.8 percent in November after climbing by 0.6 percent in October. Street had expected producer prices to rise by 0.5 percent. With the stronger than expected monthly price growth, the annual rate of producer price growth accelerated to 9.6 percent in November from 8.8 percent in October. The Labor Department said the year-over-year spike reflected the largest advance since 12-month data were first calculated in November 2010. Further, lingering worries about the new Omicron variant of the coronavirus have also generated some selling pressure after the World Health Organization warned the new variant is spreading faster than previous strains. On the sectoral front, software stocks turned in some of the market's worst performances on the day, resulting in a 3.3 percent nosedive by the Dow Jones US Software Index. Considerable weakness was also visible among housing stocks, as reflected by the 1.8 percent slump by the Philadelphia Housing Sector Index. Oil service stocks also came under pressure over the course of the session after seeing early strength, dragging the Philadelphia Oil Service Index down by 1.6 percent.

 

Crude oil futures ended lower on Tuesday, extending their previous session's losses,  on concerns about the outlook for energy demand on account of renewed restrictions on movement in several countries amid rising new cases of the Omicron variant of the coronavirus. Further, oil prices were also weighed down by a firm dollar amid increasing prospects of the Federal Reserve resorting to a faster pace of tapering of its asset-buying program following data showing an acceleration in US producer price inflation. Meanwhile, the International Energy Agency's (IEA's) report said that the new variant would slow a recovery in demand for crude contributed as well to the decline in oil prices. The IEA has cut its 2022 supply forecast from non-OPEC producers by 100,000 barrels a day and has also said global demand for oil will drop by 100,000 barrels a day from its earlier forecast. Benchmark crude oil futures for January delivery fell $0.56 or about 0.8 percent to settle at $70.73 a barrel on the New York Mercantile Exchange. Brent crude for February delivery declined $0.94 or 1.25 percent to settle at $73.45 a barrel on London's Intercontinental Exchange.   

 

Rupee ended substantially weaker against dollar on Tuesday on account of continued dollar demand from importers and banks. Besides, selloff in domestic equity markets also weighed on the rupee sentiment. Traders were worried amid fresh scare over the possible severity of Omicron variant, after WHO warned it as a very high global risk, with some evidence that it evades vaccine protection. Additional pressure came in as India's annual wholesale price-based inflation accelerated to 14.23% in November, its highest in at least 12 years, boosted by bigger hikes in prices of fuel and food. On the global front, dollar scaled a one-week high on Tuesday versus a basket of major currencies, supported by expectations of a hawkish Federal Reserve meeting and continued uncertainty about the Omicron coronavirus variant. Finally, the rupee ended 75.88 (Provisional), weaker by 10 paise from its previous close of 75.78 on Monday.

 

The FIIs as per Tuesday's data were net seller in equity segment, while net buyer in debt segment. In equity segment, the gross buying was of Rs 8433.05 crore against gross selling of Rs 10351.93 crore, while in the debt segment, the gross purchase was of Rs 426.30 crore against gross selling of Rs 340.56 crore. Besides, in the hybrid segment, the gross buying was of Rs 6.59 crore against gross selling of Rs 10.02 crore.

 

The US markets ended lower on Tuesday after data showed producer prices increased more than expected in November, solidifying expectations the Federal Reserve this week will announce a faster wind-down of asset purchases. Asian markets are trading mixed on Wednesday as investors awaited the outcome of the US central bank's policy review. Indian markets extended losses to the third day in a row on Tuesday, as renewed concerns about the Omicron variant of COVID-19 spooked investors globally. Today, markets are likely to make a sluggish opening amid mixed global cues. Traders will be concerned as the Asian Development Bank for the second time in three months has scaled down India's growth estimate for the fiscal year ending March 2022 due to supply chain issue of industries. There will be some cautiousness as the Centre for Monitoring Indian Economy (CMIE) stated that the urban unemployment rate spiked to the double-digit rate for the first time in 17 weeks, to be 10.09% for the week-ended December 12, pushing the country's overall jobless rate to a nine-week high of 8.53%. The rural jobless rate was also at a nine-week high of 7.42% during the week. However, some support may come as the government data showed that India's merchandise exports jumped 27.16 per cent to $30.04 billion in November on the back of good performance by sectors like petroleum products, engineering goods and electronic items. The exports stood at $23.62 billion in November 2020. Some support may also come as Union Minister of Commerce and Industry Piyush Goyal said India is becoming the global hub for innovation with the third-largest startup ecosystem. Traders may take note of Finance Minister Nirmala Sitharaman said the Centre earned nearly Rs 8.02 lakh crore from taxes on petrol and diesel during the last three fiscal years, of which more than Rs 3.71 lakh crore was collected in FY21 alone. Meanwhile, the finance ministry has turned down a key suggestion of the NK Singh-led Fiscal Responsibility and Budget Management (FRBM) Committee to set up an independent Fiscal Council consisting of experts to assess and advise on the government's spending and fiscal policies. NBFCs stocks will be in focus as the RBI introduced a prompt corrective action (PCA) framework for large non-banking financial companies (NBFCs), putting restrictions on para-banks whenever vital financial metrics dip below the prescribed threshold. The PCA framework for NBFCs comes into effect on October 1 next year on the basis of their financial position on or after March 31. Tata Group stocks will be in limelight with report that the Tata Group is in discussions with some major international companies, including those from Taiwan, for its foray into the semiconductor chip business. Besides, HP Adhesives, one of the leading manufacturers of consumer adhesives and sealants, Rs 126 crore IPO will open for subscription today. The price band for the issue is Rs 262 - 274 per share.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

17,324.90

17,241.74

17,392.14

BSE Sensex

58,117.09

57,839.84

58,358.39

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ITC

375.08

228.20

224.80

234.35

Power Grid Corporation of India

360.31

212.30

205.95

215.90

Tata Motors

177.22

489.40

484.49

493.14

ICICI Bank

174.88

757.80

747.95

766.00

Oil & Natural Gas Corporation

123.31

146.35

144.39

147.89

 

  • Bharti Airtel is going to collaborate with Capgemini to bringing India-specific, 5G-based enterprise grade solutions to the country. 
  • Maruti Suzuki India's light commercial vehicle -- Super Carry has crossed one lakh sales cumulative milestone in five years of its launch in the country. 
  • Tech Mahindra has achieved new Premier Consulting Partner status in the AWS Partner Network.
  • L&T's construction arm -- L&T construction has secured a large order for its buildings and factories business from the Government of Odisha.
News Analysis