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NSE Intra-day chart (19 October 2022)
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Market Commentary 20 October 2022
Markets likely to get negative start on weak global cues

 

Indian equity benchmarks erased most of their initial gains but managed to end in green on Wednesday mostly because of buying in index majors Nestle, HDFC and Reliance Industries. Key gauges made positive start, as traders took some support with Icra Ratings' statement that after rising steeply for a month, the cost of market borrowing for states declined sharply on Tuesday with the weighted average cut-off falling by 11 basis points to 7.72 per cent from 7.83 per cent last week. Some optimism also came after a Crisil Ratings' latest report stated that securitisation volumes have jumped 48 per cent to over Rs 75,000 crore for the first half of the fiscal (H1FY23). It said the long track record of stable performance of securitised pools, despite several episodes of adversity, may have eased investor concerns, but some investors continue to be apprehensive. Traders took a note of report that Tuhin Kanta Pandey, secretary in the Department of Investment and Public Asset Management, said the Indian government should focus on privatisation of state-run companies instead of chasing high divestment targets, pointing to market volatility and investors' shaky appetite for risk. Sentiments remained positive in late afternoon deals, amid a private report stating that freshers' hiring intentions have increased to 61 per cent for the July-December 2022 period as employers across India look to hire due to the accelerated rate of tech and digital advancements. However, key gauges trimmed most of gains in final minutes of trade as traders were anxious with exchange data showed foreign institutional investors (FIIs) remained net sellers in the capital market on Tuesday as they offloaded shares worth Rs 153.40 crore. Meanwhile, kick-starting stakeholder consultation for 2023-24 Budget, the finance ministry has sought suggestions from industry and trade associations regarding direct and indirect taxes. Along with the suggestions, the industry has to submit justification for their demand which, if found with merit, could become part of the Union Budget for 2023-24 (April-March), to be tabled in Parliament on February 1, 2023. Finally, the BSE Sensex rose 146.59 points or 0.25% to 59,107.19 and the CNX Nifty was up by 25.30 points or 0.14% to 17,512.25.

 

The US markets ended lower on Wednesday on profit booking as traders cashed in on the strong gains posted on Monday and Tuesday. Lingering concerns about higher interest rates and the impact on the global economy also continued to weigh on the markets along with a jump in treasury yields. The yield on the benchmark ten-year note moved sharply higher following a modest pullback on Tuesday, reaching its highest levels in fourteen years.  The weakness on markets came despite a notable advance by shares of Netflix (NFLX), with the streaming giant surging by 13.1 percent. However, downside remained capped following the release of the Federal Reserve's Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts. The Beige Book said economic activity in the US has expanded modestly since early September, although the report noted conditions varied across industries and districts. The Fed said four districts saw flat activity and two cited declines, with slowing or weak demand attributed to higher interest rates, inflation, and supply disruptions. With regard to inflation, the Beige Book noted price growth remained elevated but acknowledged some easing across several districts. On the sectoal front, housing stocks moved sharply lower over the course of the session, dragging the Philadelphia Housing Sector Index down by 4.5 percent. The sell-off by housing stocks came after the Commerce Department released a report showing housing starts tumbled by more than expected in the month of September. Substantial weakness also emerged among banking stocks, as reflected by the 3.6 percent nosedive by the KBW Bank Index. Biotechnology stocks also showed a significant move to the downside on the day, resulting in a 3.4 percent plunge by the NYSE Arca Biotechnology Index.

 

Crude oil futures ended sharply higher on Wednesday as US government data showed declines in domestic crude and gasoline supplies. Data from US Energy Information Administration (EIA) showed crude inventories in the US dropped by 1.7 million barrels last week (October 14) versus expectations for an increase of 1.4 million barrels. Gasoline stocks fell by 114,000 barrels last week compared to expectations for a 1.1 million-barrel drop. The American Petroleum Institute had on Tuesday reported that crude oil stockpiles in the US unexpectedly fell by 1.3 million barrels in the week ended October 14 compared to an increase of inventory by 7.05 million barrels in the previous week. Markets were expecting inventories to rise by 1.55 million barrels. Benchmark crude oil futures for November delivery rose $2.73 or 3.3 percent at $85.55 a barrel on the New York Mercantile Exchange. Brent crude for December delivery surged $2.38 or about 2.6 percent to settle at $92.41 a barrel on London's Intercontinental Exchange. 

 

Indian rupee ended at new record low against dollar on Wednesday, as surging US treasury yields forced a rally in the greenback. Investors maintained cautious approach even after Crisil Ratings' latest report stated that securitisation volumes have jumped 48 per cent to over Rs 75,000 crore for the first half of the fiscal (H1FY23). It said the long track record of stable performance of securitised pools, despite several episodes of adversity, may have eased investor concerns, but some investors continue to be apprehensive. On the global front, Dollar held close to a 32-year peak versus the yen on Wednesday while edging up from a two-week trough against a basket of major peers, underpinned by the prospect of aggressive U.S. Federal Reserve interest rate hikes. Finally, the rupee ended at 83.02 (Provisional), weaker by 62 paisa from its previous close of 82.40 on Tuesday.

 

The FIIs as per Wednesday's data were net buyer in both equity and debt segment. In equity segment, the gross buying was of Rs 9144.77 crore against gross selling of Rs 8286.71 crore, while in the debt segment, the gross purchase was of Rs 714.74 crore against gross selling of Rs 405.44 crore. Besides, in the hybrid segment, the gross buying was of Rs 5.63 crore against gross selling of Rs 14.21 crore.

 

The US markets ended lower on Wednesday as weakness in shares of Abbott Laboratories and a rise in Treasury yields sapped momentum from the current earnings season and outweighed a surge in Netflix Inc shares. Asian markets are trading mostly in red on Thursday as economic fears weigh, and US stocks fell as Treasury yields climbed overnight stateside. Indian markets extended their gains for fourth straight session and ended higher on Wednesday with investors focusing on quarterly earnings updates. Today, markets are likely to get negative start amid downbeat global cues and a sharp decline in the rupee. There will be some cautiousness as foreign institutional investors (FIIs) net offloaded shares worth Rs 453.91 crore on Wednesday (October 19), according to the provisional data available on the NSE. However, some respite may come later in the day as RBI Monetary Policy Committee (MPC) member Ashima Goyal said that the efforts of the Reserve Bank to contain price rise by repeatedly increasing interest rates will help in containing inflation, which is likely to fall below 6 per cent next year. Goyal further said that the policy rate hikes have largely reversed pandemic-time cuts but the real rate remains low enough not to hurt the growth recovery. Besides, the finance ministry has released Rs 1,764 crore grant to four states. The states to which grants were released are Andhra Pradesh (Rs 136 crore), Chhattisgarh (Rs 109 crore), Maharashtra (Rs 799 crore) and Uttar Pradesh (Rs 720 crore). Meanwhile, the GST Council is likely to meet in the first half of November to discuss the reports of the panel of ministers on setting up GST appellate tribunal and levy of tax casinos and online gaming. There will be some buzz in aviation industry stocks as data released by aviation safety regulator Directorate General of Civil Aviation (DGCA) showing that domestic air passenger volume grew 64.61 per cent to 10.35 million in September over the same period last year. Diagnostic companies' stocks will be in focus as rating agency Crisil said a fall in Covid-19 tests will lead to an up to 7 per cent dent in diagnostic companies' toplines in FY23. It added that the fall in revenues in FY23 will come after a handsome 30 per cent growth in FY22 on higher testing, attributed the fall in Covid testing in the ongoing fiscal to the waning intensity of the pandemic and also a preference for self-test kits. There will be some reaction in metal stocks as the World Steel Association (WSA) said global steel demand will erode this year by 2.3% due to surging inflation and climbing interest rates, downgrading their forecast. Mineral industry stocks will be in limelight as the country's mineral output registered a cumulative growth of 4.2 per cent in the first five months of this fiscal compared to the year-ago period. Investors await more of financial results from India Inc for domestic cues, with Bajaj Finance, Axis Bank, Asian Paints and ITC due to post their earnings later in the day. Moreover, private market intelligence platform Tracxn Technologies will debut in the market on October 20.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

17,512.25

17,454.20

17,588.95

BSE Sensex

59,107.19

58,912.75

59,350.67

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

3,87.64

100.05

99.41

100.96

ITC

1,62.96

346.35

341.61

349.26

Coal India

1,38.86

238.20

235.80

241.80

Axis Bank

1,08.68

829.85

818.35

839.90

State Bank of India

95.40

553.40

548.81

560.71

 

  • ITC has entered into an agreement to acquire further 1000 Compulsorily Convertible Preference Shares of Rs 10 each of Mother Sparsh Baby Care.
  • Reliance Industries' telecom arm -- Reliance Jio Infocomm has added 32,81,699 customers in August 2022.
  • Tata Motors has received an order for 200 electric buses which will be deployed in Jammu and Srinagar. 
  • Tech Mahindra has inked a MoU with the Government of Gujarat under its IT/ITeS policy.
News Analysis