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Market Commentary 19 January 2024
Benchmarks likely to open in green on Friday

Extending previous session's bloodbath, Indian equity benchmarks faced lackluster trade for yet another day on Thursday, with both Sensex and Nifty ending lower by half a percent each. After a gap down opening, markets remained lower for the whole trading session, amid signs that global central banks including the Federal Reserve and the European Central Bank will not rush to lower interest rates as previously anticipated. Traders remained cautious as external affairs minister S Jaishankar said that Houthi attack in Red Sea will hit India's energy and economy. He stressed that the issue should be speedily addressed. A weak trade continued over the Dalal Street in afternoon deals, on the back of selling at Consumer Durables, Utilities and Power counters. The weekly F&O expiry added some volatility in the markets. Foreign fund outflows also dented sentiments. Provisional data from the NSE showed that foreign institutional investors (FIIs) sold shares worth Rs 10,578.13 crore on January 17. Traders overlooked Governor Shaktikanta Das' statement that consumer price index-based inflation, the main yardstick for the Reserve Bank of India's policy making, is likely to average 4.5 per cent in the next financial year and gross domestic product (GDP) growth is likely to stay above 7 per cent. Finally, the BSE Sensex fell 313.90 points or 0.44% to 71,186.86 and the CNX Nifty was down by 109.70 points or 0.51% to 21,462.25.

The US markets ended higher on Thursday. Tech stocks helped lead the way higher on markets, with shares of Apple jumping by 3.3 percent after Bank of America upgraded its rating on the company's stock to Buy from Neutral. A rally by semiconductor stocks contributed to the surge by the Nasdaq, as the Philadelphia Semiconductor Index spiked by 3.4 percent. Besides, the rebound on markets came despite a continued increase by treasury yields, which moved higher after the Labor Department released a report showing an unexpected weekly decrease in first-time claims for U.S. unemployment benefits. The report said initial jobless claims fell to 187,000 in the week ended January 13th, a decrease of 16,000 from the previous week's revised level of 203,000. Street had expected jobless claims to inch up to 207,000 from the 202,000 originally reported for the previous week. With the unexpected decline, jobless claims dropped to their lowest level since hitting 182,000 in the week ended September 24, 2022. Meanwhile, a report released by the Federal Reserve Bank of Philadelphia showed regional manufacturing activity contracted at a slightly slower rate in the month of January. The Philly Fed said its diffusion index for current general activity rose to a negative 10.6 in January from a revised reading of negative 12.8 in December. A negative reading still indicates a contraction in regional manufacturing activity. Street had expected the index to rise to a negative 7.0 from the negative 10.5 originally reported for the previous month.

Crude oil futures ended sharply higher on Thursday on account of drop in U.S. crude inventories in the week ended January 12. Data from U.S. Energy Information Administration (EIA) showed crude inventories dropped by 2.5 million barrels last week, as against expectations for a decline of 313,000 barrels. Meanwhile. Gasoline inventories increased by 3.1 million barrels last week, higher than an expected increase of 2.2 million barrels, while distillate stocks were up 2.4 million barrels in the week, more than 2.5 times the expected increase. Benchmark crude oil futures for February delivery rose $1.52 or 2.09 percent to settle at $78.08 a barrel on the New York Mercantile Exchange. Brent crude for March delivery gained $1.22 or 1.56 percent to settle at $79.10 a barrel on London's Intercontinental Exchange.  

Indian rupee appreciated marginally against the US dollar on Thursday tracking a weak American currency against major rivals overseas. A weak trend in domestic equity markets and rising crude oil prices kept the movement of the domestic currency restricted. Traders took support with Reserve Bank of India Governor Shaktikanta Das' statement that consumer price index-based inflation, the main yardstick for the Reserve Bank of India's policy making, is likely to average 4.5 per cent in the next financial year and gross domestic product (GDP) growth is likely to stay above 7 per cent. On the global front, the dollar hovered near a five-week peak against major peers on Thursday after robust U.S. retail sales data added to expectations the Federal Reserve will not rush to lower interest rates. Finally, the rupee ended at 83.13 (Provisional), stronger by 1 paisa from its previous close of 83.14 on Wednesday.

The FIIs as per Thursday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 17204.13 crore against gross selling of Rs 27686.77 crore, while in the debt segment, the gross purchase was of Rs 1700.41 crore with gross sales of Rs 784.97 crore. Besides, in the hybrid segment, the gross buying was of Rs 198.88 crore against gross selling of Rs 179.80 crore.

The US markets ended higher on Thursday on speculation the Federal Reserve will be in no rush to cut interest rates as the economy shows signs of resilience. Asian markets are trading mostly in green on Friday with Nikkei up more than 1 percent as investors assessed the country's December inflation numbers. Indian markets ended lower for the third straight day on Thursday with bank and IT stocks coming under selling pressure amid weak global cues. Today, markets are likely to open in green, after three-session of profit booking, following firm cues from global markets. Traders will be taking encouragement as Reserve Bank of India Governor Shaktikanta Das said slowing global growth is reason for concern, a cause of worry but India is better placed to deal with various geopolitical challenges. He said the country's monetary policy must remain actively disinflationary despite the recent sharp fall in core inflation. Some support will come with a private report that Covid-19 cases are seeing a downward trend in India, with active cases falling to their lowest since December 21, 2023. The country recorded 2,439 active cases on January 18, 2024, the lowest national tally since the 2,669 cases recorded a month ago. Traders may take note of report that the Reserve Bank of India in its monthly bulletin said that India must aim to sustain the current growth momentum and secure a real GDP growth of at least 7% next fiscal year in an environment of macroeconomic stability. However, foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) sold shares worth Rs 9,901.56 crore on January 18, provisional data from the NSE showed. There may be some cautiousness as rating agency ICRA projected the GDP growth rate to slow down to below 6 per cent in the December quarter, mainly account of sharp fall in kharif crop output, and weak progress in rabi sowing for some crops. India had registered a Gross Domestic Product (GDP) growth rate of 7.6 per cent in the July to September period. There will be some reaction in Jewellery industry stocks with report that the Gem & Jewellery Export Promotion Council (GJEPC) has requested the Union Government to consider the introduction of the safe harbour rule for the sale of rough diamonds through Special Notified Zones (SNZs). IT stocks will be in focus tracking an overnight tech-rally in the US. Meanwhile, Q3 earnings of Reliance Industries, Hindustan Unilever, UltraTech Cement and Paytm will remain on the radar.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,462.25

21,318.74

21,572.59

BSE Sensex

71,186.86

70,751.15

71,536.94

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

HDFC Bank

805.35

1490.00

1475.04

1509.99

Tata Steel

452.73

131.35

128.95

133.00

NTPC

324.81

299.60

293.66

308.41

Power Grid

255.23

233.60

227.86

237.51

ONGC

192.32

233.90

227.54

237.39

  • Sun Pharma has entered into a definitive merger agreement with Taro to acquire all of the outstanding ordinary shares of Taro other than the shares already held by Sun Pharma.
  • Tech Mahindra has launched i.Riskman, an ESG risk assessment platform designed to empower organizations to identify, assess, and manage climate-related risks.
  • Adani Enterprises is reportedly planning to invest Rs 50,000 crore in Maharashtra over the next 10 years to set up 1 GW of hyperscale data infrastructure.
  • M&M's wholly-owned dropdown subsidiary -- Mahindra Aerostructures and Airbus Aerostructures GmbH have signed a new contract for the manufacture and delivery of metallic components for all Airbus commercial aircraft models.

News Analysis