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NSE Intra-day chart (15 June 2022)
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Market Commentary 16 June 2022
Benchmarks likely to open in green on supportive global cues

 

Indian benchmark indices ended lower for the fourth straight day on Wednesday, amid a mixed trend across global markets as investors awaited the outcome of a key Fed meeting. Key gauges made cautious start and swung between gains and losses throughout the session, as unabated foreign fund outflows continued to weigh on the domestic equity markets. Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 4,164.01 crore on Monday, as per exchange data.  Some concerns also came after Crisil Ratings said in a report that non-banking financial companies are likely to witness close to Rs 18 lakh crore of their outstanding debt getting repriced at higher levels in FY23 amid the rising interest rate scenario. The agency expects borrowing cost of NBFCs (Non-Banking Financial Companies) to go up by 85-105 basis points (bps) in this fiscal owing to recent hikes in repo rate by 90 basis points in two tranches and an expected rise of another 75 bps in the remaining fiscal. Cautiousness prevailed in the markets in late afternoon deals, after data showing that India's trade deficit widened to a record $24.29 billion in May 2022 from $6.53 billion in the same month last year due to a sharp jump in the country's imports. The merchandise trade deficit in May 2022 is the highest ever monthly gap. On a year-on-year basis, it has surged by 271.96 per cent. Some anxiety also came after credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that the sharp rise in the interest rate is likely to affect the volume in non-priority sector lending (PSL) securitisation in the near term, unlike that of PSL transactions, which are more driven by regulatory requirements. According to the report, the sharp rate rise of more than 1%-2% along with a challenging business environment may affect borrowers with floating interest rate loans such as home loans and loan-against-property (LAP), and especially borrowers having lesser financial flexibilities. Finally, the BSE Sensex fell 152.18 points or 0.29% to 52,541.39 and the CNX Nifty was down by 39.95 points or 0.25% to 15,692.15.

 

The US markets ended higher on Wednesday after the Federal Reserve announced the biggest increase in interest rates in almost thirty years. The Fed revealed that it has decided to raise the target rate for the federal funds rate by 75 basis points to 1.50 to 1.75 percent, marking the biggest rate hike since 1994. The widely expected move by the Fed comes as a recent report from the Labor Department showed consumer price inflation at the fastest annual rate in forty years. Citing its goals of maximum employment and inflation at a rate of 2 percent over the longer run, the Fed also indicated that further rate hikes are likely to be appropriate. Fed Chair Jerome Powell indicated the central bank could raise interest rates by another 75 basis points at its next meeting in late July. The Fed also said it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. In its assessment of the US economy, the Fed said overall economic activity appears to have picked up after edging down in the first quarter. The central bank described recent jobs gains as robust and noted the unemployment rate has remained low. The Fed said inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures. On the economic data front, the Commerce Department released a report showing an unexpected decrease in U.S. retail sales in the month of May. The report showed retail sales fell by 0.3 percent in May after climbing by a downwardly revised 0.7 percent in April. Street had expected retail sales to edge up by 0.2 percent compared to the 0.9 percent increase originally reported for the previous month.

 

Crude oil futures ended lower on Wednesday, extending their previous session's losses, after data showed a jump in oil inventories in the US last week. Data released by the Energy Information Administration (EIA) showed oil inventories in the US rose by 2 million barrels last week to 418.7 million barrels, against expectations for a 1.3 million-barrel drop. Further, weakness also prevailed as traders worried about a fall in demand after the Federal Reserve hiked interest rate by three-quarters of a percentage point. The biggest hike by the US central bank since 1994 also sent dollar higher with the dollar index rising to its highest since 2002. A stronger greenback makes US dollar-priced oil more expensive for holders of other currencies, curtailing demand. Benchmark crude oil futures for July delivery fell $2.21 or 1.8 percent to settle at $116.72 a barrel on the New York Mercantile Exchange. Brent crude for August delivery dropped $2.01 or 1.65 percent to settle at $119.16 a barrel (provisional) on London's Intercontinental Exchange.

 

Indian rupee ended considerably lower against dollar on Wednesday on emergence of demand for the greenback from importers. Investors were taking cautious approach ahead of US Fed meet outcome later today. Traders were worried after India's trade deficit widened to a record $24.29 billion in May 2022 from $6.53 billion in the same month last year due to a sharp jump in the country's imports. The merchandise trade deficit in May 2022 is the highest ever monthly gap. On a year-on-year basis, it has surged by 271.96 per cent. On the global front, euro jumped after the European Central Bank's governing council said it would hold an unscheduled meeting on Wednesday to discuss the recent sell-off in government bond markets, hours ahead of a closely-watched meeting of the U.S Federal Reserve. Finally, the rupee ended at 78.22 (Provisional), weaker by 18 paise from its previous close of 78.04 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 4422.93 crore against gross selling of Rs 8735.79 crore, while in the debt segment, the gross purchase was of Rs 410.79 crore against gross selling of Rs 509.65 crore. Besides, in the hybrid segment, the gross buying was of Rs 17.27 crore against gross selling of Rs 22.99 crore.

 

The US markets ended higher on Wednesday after a policy announcement by the Fed that raised interest rates to market expectations as the US central bank seeks to fight rising inflation without sparking a recession. Asian markets are trading mostly in green on Thursday after the US central bank's policy move, which is along expected lines. Indian markets closed yet another session in red on Wednesday, scaling fresh 11-month closing lows. Today, markets are likely to get optimistic start tracking supportive global cues. Investors will be looking ahead to the panel of ministers on GST rate rationalisation is scheduled to meet on June 17 to discuss possible tweaking in tax rates. The Group of Ministers (GoM) is likely to discuss possible changes in the tax slab, they said, adding that the final report of the panel would take some more time. Traders will be taking encouragement with a report that India has witnessed the sharpest rise among the Asian economies, with a six-position jump from 43rd to 37th rank on the annual World Competitiveness Index compiled by the Institute for Management Development, largely due to gains in economic performance. Some support will come as Madhaiyaan Angamuthu, chairman of Agricultural and Processed Food Products Exports Development Authority (APEDA) said India's agricultural and processed food product exports will continue to surge in the current fiscal after a record shipment valued at $25.6 billion in 2021-22 because of global demand for the agricultural commodities. However, some cautiousness may come with report that foreign institutional investors (FIIs) have net sold Rs 3,531.15 crore worth of shares on June 15, as per provisional data available on the NSE. Besides, the government data showed that India's merchandise exports in May rose by 20.55 per cent to $38.94 billion, while the trade deficit ballooned to a record $24.29 billion and imports during May 2022 grew by 62.83 per cent to $63.22 billion. There will be some reaction in mineral's industry stocks as the government said the country's mineral production rose by 7.8 per cent in April 2022 over the same month a year ago. Manganese ore, coal, lignite, bauxite and phosphorite were some of the minerals that showed positive growth in April. Cement industry stocks will be in limelight as credit rating agency Fitch Ratings said it believes a sustained gross domestic product (GDP) growth, the government's thrust on infrastructure and affordable housing, and a revival in corporate capex, will underpin growth of the cement sector.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

15,692.15

15,652.81

15,757.56

BSE Sensex

52,541.39

52,400.59

52,774.96

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Oil and Natural Gas Corporation

162.23

151.00

148.79

155.24

Tata Motors

151.92

412.95

408.14

417.09

NTPC

151.72

148.30

146.00

152.15

State Bank of India

99.20

450.25

447.41

454.26

Tata Steel

92.44

223.75

458.19

481.79

 

  • Bharti Airtel has entered into an agreement for acquisition of 62,58,000 (14.304%) equity shares in Avaada MHAmravati. 
  • Asian Paints has subscribed to 51% of the equity share capital of Weatherseal Fenestration on preferential basis for an aggregate cash consideration of Rs 18.84 crore. 
  • Hero MotoCorp backed electric two-wheeler maker Ather Energy is in talks with several state governments to set up a new manufacturing facility in the country. 
  • SBI has raised its deposit and lending rates following the Reserve Bank's repo rate hike last week.
News Analysis