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Market Commentary 16 May 2024
Benchmarks likely to make gap-up opening on firm global cues

Snapping three days of gains, Indian equity benchmarks took a pause and closed marginally in red on Wednesday, dragged down by selling pressure in FMCG, Auto and Banking stocks. Markets opened on a positive note as traders took support with Moody's Ratings stating that the Indian economy is projected to expand 6.6 per cent in the current fiscal year and said strong credit demand fuelled by robust economic growth will support the NBFC sector's profitability. It added that the Indian economy is estimated to have expanded 8 per cent in the 2023-24 fiscal year. However, key gauges soon erased initial gains and slipped into red in morning deals due to uncertainty surrounding the general election results. Traders turned cautious with ICRA Chief Economist Aditi Nayar's statement that the wholesale food inflation, which is at a four-month high, will continue to be a cause for concern in May and June as heatwave is likely to jack up prices of perishable commodities. Although the impact of high base of last year will play out in July and August, the impact of monsoon will determine the price conditions in the subsequent months. Sentiments remained dull in late afternoon deals with a private report that even as stocks have bounced back, foreign investors continue to remain aggressive sellers this month. On Tuesday, FIIs net sold stocks worth Rs 4,065 crore, taking the May month's tally to Rs 33,540 crore. Some concern also came as India's merchandise trade deficit expanded to $19.1 billion in April. India's exports rose marginally by 1.06 per cent to $34.99 billion in April 2024, against $34.62 billion during the same period last year. However, losses remained capped as some optimism remained among traders with report by the Global Trade Research Initiative (GTRI) stating that the development of Chabahar Port will help India enhance its logistical capabilities and expand its trade routes to Central Asia and for that there is a need to ensure necessary infrastructure, and processes to effectively manage the cargo flow at the port. Finally, the BSE Sensex fell 117.58 points or 0.16% to 72,987.03, and the CNX Nifty was down by 17.30 points or 0.08% points to 22,200.55.

The US markets ended higher on Wednesday with Nasdaq settling over 230 points as a soft reading on consumer prices fueled hopes that the Federal Reserve could cut interest rates sooner than expected. A highly anticipated report released by the Labor Department showed consumer prices in the U.S. rose by slightly less than expected in the month of April. The Labor Department said its consumer price index increased by 0.3 percent in April after rising by 0.4 percent in March. Street had expected consumer prices to climb by another 0.4 percent. The report also said the annual rate of consumer price growth slowed to 3.4 percent in April from 3.5 percent in March, in line with expectations. The monthly increase in consumer prices partly reflected a surge in gasoline prices, which shot up by 2.8 percent in April after jumping by 1.7 percent in March. Excluding food and energy prices, core consumer prices still rose by 0.3 percent in April after climbing by 0.4 percent in March. The increase in core prices matched street estimates. The annual rate of core consumer price growth decelerated to 3.6 percent in April from 3.8 percent in March. The slowdown also came in line with expectations. On the sectoral front, computer hardware stocks saw substantial strength on the day, driving the NYSE Arca Computer Hardware Index up by 4.1 percent to a record closing high. Shares of Dell (DELL) soared after Morgan Stanley raised its price target on the computer maker's stock to $152 from $128, calling it the best way to play the AI infrastructure build-out. Significant strength was also visible among housing stocks, as reflected by the 3.4 percent surge by the Philadelphia Housing Sector Index.

Crude oil futures ended higher on Wednesday buoyed by a report showing a bigger than expected drop in U.S. crude inventories in the week ended May 10th. Data released by the Energy Information Administration (EIA) showed crude oil inventories in the U.S. fell by 2.5 million barrels in the week ended May 10th, after falling by 1.4 million barrels in the previous week. Besides, the dollar's weakness contributed as well to the rise in oil prices. Benchmark crude oil futures for June delivery rose $0.61 or about 0.78% to settle at $78.63 a barrel on the New York Mercantile Exchange. Brent crude for July delivery gained $0.33 or 0.40% to $82.75 per barrel on London's Intercontinental Exchange.

Indian rupee settled higher on Wednesday as the American currency retreated from its elevated level. Sentiments were positive as Moody's Ratings said the Indian economy is projected to expand 6.6 per cent in the current fiscal year and said strong credit demand fuelled by robust economic growth will support the NBFC sector's profitability. It added that the Indian economy is estimated to have expanded 8 per cent in the 2023-24 fiscal year. Traders overlooked report that India's merchandise trade deficit expanded to $19.1 billion in April. India's exports rose marginally by 1.06 per cent to $34.99 billion in April 2024, against $34.62 billion during the same period last year. On the global front, dollar dipped to a one-month low versus the euro on Wednesday amid lower treasury yields as traders braced for a key U.S. inflation report later in the day that could dictate the path of Federal Reserve policy. Finally, the rupee ended at 83.50 (Provisional), up by 1 paisa from its previous close of 83.51 on Tuesday.

The FIIs as per Wednesday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 11483.06 crore against gross selling of Rs 13996.13 crore, while in the debt segment, the gross purchase was of Rs 933.91 crore with gross sales of Rs 1015.37 crore. Besides, in the hybrid segment, the gross buying was of Rs 27.70 crore against gross selling of Rs 33.02 crore.

The US markets ended higher on Wednesday as bond yields dropped on news of slower inflation, boosting expectations for Fed rate cuts by September. Asian markets are trading in green on Thursday following gains on Wall Street fueled by strong US inflation data, bolstering expectations of Federal Reserve rate cuts. Indian markets ended the volatile trading session in red on Wednesday as investors chose to stay sidelines amid election-related nervousness amid foreign fund outflows. Today, Indian markets are likely to make gap-up opening tracking overnight gains on Wall Street as well as firm trade in Asian counterparts. Some support will come with a private report that India's monsoon is forecast to hit the Kerala coast in the southwest on May 31, offering relief to farmers after below average rainfall last year. The monsoon, the lifeblood of the country's $3.5 trillion economy, delivers nearly 70% of the rain that India needs to water farms and recharge reservoirs and aquifers. Nearly half of India's farmland, without any irrigation cover, depends on the annual June-September rains to grow a number of crops. Traders may take note of the National Sample Survey Office (NSSO) report showing that the unemployment rate for people aged 15 years and above in urban areas declined to 6.7 per cent in the January-March period from 6.8 per cent a year ago. Besides, India Electronics and Semiconductor Association (IESA) signed a Memorandum of Understanding (MoU) with Federation of Indian Chambers of Commerce and Industry (FICCI) to promote innovation, support the semiconductor and electronics industry, strengthen supply chains, and foster development of the ecosystem in India with global impact. However, some cautiousness may creep in amid continued FIIs outflows. FIIs sold shares worth Rs 2,832.83 crore on May 15. So far in May, the FIIs have been aggressive sellers and reportedly build high short positions in the derivatives market. Some pessimism likely to remain in the markets after Commerce Secretary Sunil Barthwal said India's merchandise trade deficit widened to $19.1 billion in the month of April. Merchandise exports inched up 1.06 per cent on an annual basis to $34.99 billion. The government data showed that imports in April grew 10.3 per cent year-on-year to $54.09 billion after growing $57.28 billion in March. Disruptions caused by geopolitical tensions, such as the Red Sea crisis, and softer commodity prices dragged down the value of India's goods exports to a five-month low in April. Oil & gas industry stocks will be in focus after the government in its bi-weekly review cut the windfall tax on petroleum crude from Rs 8,400 to Rs 5,700 per metric tonne with effect from May 16. Also, the Organisation of Petroleum Exporting Countries said India's oil demand is expected to grow to 5.80 million barrels per day in 2025, up 4.1% from the 5.57 million barrels per day projected in 2024. There will be some reaction in NBFCs stocks as the Reserve Bank of India (RBI) asked non-banking financial companies (NBFCs) to strictly comply with norms regarding loan-to-value ratio, auction processes, and cash disbursement after discovering that some of these companies violated regulatory guidelines. Meanwhile, investors will keep an eye on several companies ahead of their Q4 results, including M&M, Biocon, Container Corporation of India, Crompton Greaves Consumer Electricals, and others.

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

Index

Previous close

Support

Resistance

NSE Nifty

22,200.55

22,135.69

22,281.49

BSE Sensex

72,987.03

72,772.63

73,251.44

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

296.01

165.85

164.69

167.29

Coal India

235.44

467.50

454.66

475.16

Tata Motors

196.68

946.00

936.41

964.26

HDFC Bank

194.66

1440.80

1431.16

1455.06

Power Grid

113.98

314.35

310.04

317.49

  • Mahindra & Mahindra's wholly-owned subsidiary -- Mahindra Holdings has executed a Share Purchase Agreement to divest entire stake held in NDCFS for Rs 425.39 crore.
  • Bajaj Finance has raised Rs 1,305 crore through the allotment of 1,30,500 Non-Convertible Debentures, at face value of Rs 1 lakh each on private placement basis.
  • Infosys has collaborated with SAP Emarsys, a cloud-based, omnichannel customer engagement platform, to empower businesses to address the growing need for omnichannel customer engagement.
  • Cipla's promoters have sold a 2.53 per cent stake in the company for the purpose of creating liquidity.

News Analysis