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Market Commentary 17 January 2024
Benchmarks likely to get gap-down opening amid uptick in US yield

Indian equity benchmarks snapped five-day gaining momentum and ended lower on Tuesday amid profit booking in Realty, Utilities and IT stocks. Markets made a cautious start as traders remained cautious with the commerce department stating that growing attacks on commercial shipping vessels travelling through the lower Red Sea have resulted in a combined impact of higher freight costs, insurance premiums and longer transit times. He cautioned that it can make imported goods significantly more expensive. However, markets erased losses and managed to trade in green in late morning deals as some support came with data showing that India's trade deficit in December narrowed to a three-month low of $19.8 billion amid an import slowdown due to falling commodity prices. India's merchandise exports registered marginal growth of 0.97 per cent to $38.45 billion in December 2023 as compared to $38.08 billion in December 2022. Imports declined by 4.85 per cent to $58.25 billion in December 2023 as compared to $61.22 billion in December 2022 due to a dip in crude oil shipments. But, buying proved short-lived as markets once again fell into red in afternoon deals, amid reports that the cost of Indian exports has more than doubled due to the Yemeni Houthi militia's attacks on ships in the Red Sea. Traders overlooked Reserve Bank of India (RBI) Monetary Policy Committee (MPC) member Ashima Goyal's statement that India's macro-fundamentals strengthened even though it faced severe external shocks (Russia-Ukraine war, Israel-Hamas war, oil prices, Houthi attacks) since 2020. She said the rupee has been relatively stable due to these factors. Meanwhile, the Reserve Bank of India's draft norms for self-regulatory organisations for the fintech sector (SRO-FT) have proposed that such entities should have a robust IT infrastructure and the ability to deploy technological solutions within a reasonable timeframe. Finally, the BSE Sensex fell 199.17 points or 0.27% to 73,128.77 and the CNX Nifty was down by 65.15 points or 0.29% to 22,032.30.

The US markets ended lower on Tuesday with Dow Jones Industrial Average selling over 230 points, as higher Treasury yields and concerns that the Federal Reserve may not cut interest rates anytime soon hurt sentiment. Traders were cautious as some hawkish comments from some central bank officials, including from the Federal Reserve. Investors also reacted to quarterly earnings updates from some major U.S. companies such as Goldman Sachs and Morgan Stanley. Morgan Stanley ended lower by more than 4 percent. Morgan Stanley's fourth-quarter bottom line totaled $1.38 billion or $0.85 per share, compared with $2.11 billion or $1.26 per share a year ago. Meanwhile, PayPal, Moderna, Hewlett Packard, Nike, Warner Bros Discovery, Bakher Hughes, Delta Air Lines, Chevron, HP, Invesco, Textron, Netflix, United Airlines Holdings and Bank of America lost 2 to 4 percent. However, Goldman Sachs gained about 0.7 percent. The lender reported fourth quarter net earnings of $1.87 billion of $5.48 per share, up from $1.19 billion or $3.32 per share in the year-ago quarter. Advanced Micro Devices climbed more than 8 percent. The stock surged on upbeat street commentary on semiconductor demand. On the economic data front, a report from the Federal Reserve Bank of New York said the NY Empire State Manufacturing Index plunged to -43.7 in January, the lowest reading since May 2020.

Crude oil futures ended lower on Tuesday on stronger U.S. dollar amid fading hopes about early interest rate cuts following some hawkish comments from central bank officials. There are expectations that weather in the U.S. will be colder than normal also weighed on oil prices. Meteorologists have reportedly projected weather in the U.S. would switch from colder than normal this week to mostly warmer than normal during the later part of the month. Benchmark crude oil futures for February delivery fell by 28 cents or 0.4 percent to settle at $72.40 a barrel on the New York Mercantile Exchange. However, Brent crude for March delivery gained 14 cents or 0.2 percent to settle at $ 78.29 a barrel on London's Intercontinental Exchange.  

Indian rupee ended lower against the US dollar on Tuesday, tracking a negative trend in domestic equities and the strength of the American currency in the overseas market. Traders were cautious with the commerce department stating that growing attacks on commercial shipping vessels travelling through the lower Red Sea have resulted in a combined impact of higher freight costs, insurance premiums and longer transit times. He cautioned that it can make imported goods significantly more expensive. Traders took a note of the commerce ministry's data showing that India's merchandise exports registered marginal growth of 0.97 per cent to $38.45 billion in December 2023 as compared to $38.08 billion in December 2022. Imports declined by 4.85 per cent to $58.25 billion in December 2023 as compared to $61.22 billion in December 2022 due to a dip in crude oil shipments. On the global front, the dollar rose on Tuesday as investors tempered their expectations for a March rate cut from the Federal Reserve, while the pound and yen fell as inflationary pressures subsided. Finally, the rupee ended at 83.12 (Provisional), weaker by 26 paise from its previous close of 82.86 on Monday.

The FIIs as per Tuesday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 13055.22 crore against gross selling of Rs 11039.88 crore, while in the debt segment, the gross purchase was of Rs 1530.36 crore with gross sales of Rs 886.83 crore. Besides, in the hybrid segment, the gross buying was of Rs 13.43 crore against gross selling of Rs 10.22 crore.

The US markets ended lower on Tuesday as higher Treasury yields and concerns that the Federal Reserve may not cut interest rates anytime soon hurt sentiment. Asian markets are trading mostly in red on Wednesday as investors awaited China's Q4 GDP, retail sales and industrial output data. Indian markets snapped a five-day winning streak and ended in red on Tuesday, with the Nifty below 22,050 mark, amid profit booking in Information Technology, pharma, realty and power stocks. Today, markets are likely to get gap-down opening tracking sell-off in the global peers as the 10-year treasury yield in the US ticked over 4 per cent. Volatile crude oil prices likely to weigh on sentiment, amid persisting concerns about likely disruptions in supply due to the attacks by the Houthi militants on vessels in the Red Sea. Traders may take note of report that ratings agency Fitch has affirmed BBB- rating for India, with the outlook stated as stable. It said India is poised to remain one of fastest-growing countries globally in next few years. It also added that beyond FY24 there is less certainty on fiscal path and trade-offs between economic growth and consolidation may become more acute. However, some respite may come later in the day amid foreign fund inflows. Provisional data from the NSE showed that foreign institutional investors (FIIs) bought shares worth Rs 656.57 crore on January 16. Some support may come as the Reserve Bank of India (RBI) governor, Shaktikanta Das, said that retail inflation is slowly moderating and is steadily moving towards the target of 4 per cent. Das stated that core inflation has started to move down, which gives confidence that monetary policy is working, while commenting that maintaining financial stability despite multiple headwinds has been the biggest achievement in the last five years. Some optimism may come as a Crisil report noted that corporates' revenues are likely to have grown 8-10 per cent in the 2023 December quarter on an annual basis. As per Crisil Ratings, the operating profits have likely expanded 100-150 basis points on-year in the three months ended December 2023, giving the corporates an overall operating margin of 19-20 per cent in the first nine months of 2023-24 fiscal. Insurance industry stocks will be in focus with a private report that the domestic insurance sector is on course to log in over 7 per cent annual growth over the next decade and the premium income is likely to double to around $450 billion by financial year 2033-34. There will be some reaction in stocks related to semiconductor as crediting the Micron investment for sparking manufacturing interest in India, Minister of State for IT Rajeev Chandrasekhar said that at least nine semiconductor manufacturing proposals were undergoing the analysis stage in the Ministry.

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

Index

Previous close

Support

Resistance

NSE Nifty

22,032.30

21,960.01

22,114.36

BSE Sensex

73,128.77

72,916.85

73,384.15

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

563.61

137.25

134.66

139.16

ONGC

345.05

234.80

230.95

238.80

BPCL

211.85

472.50

462.06

481.36

State Bank of India

150.26

637.55

632.36

643.81

Wipro

129.56

485.75

479.16

493.66

  • Mahindra & Mahindra has launched the 2024 XUV700.
  • ONGC has made two significant back-to-back natural gas discoveries in a Mahanadi basin deepwater block in the Bay of Bengal.
  • Maruti Suzuki has increased prices across models. An estimated weighted average of increase across models stands at around 0.45%.
  • L&T's construction arm -- L&T construction has secured a Mega Contract for its Railways Strategic Business Group from an authorised Japanese agency.

News Analysis