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Market Commentary 22 May 2024
Benchmarks likely to get cautious start on Wednesday

Indian equity benchmarks ended flat after a choppy trading session on Tuesday amid weak trends from Asian and European markets. Markets opened on a negative note amid foreign fund outflows. Foreign institutional investors continue to sell Indian equities, with net sales of Rs 92.95 crore worth of shares on May 18. Traders remained concerned with a private report that demand-supply mismatches could keep prices of pulses elevated until the new crop starts arriving in the market in October, putting further pressure on already high food inflation. However, markets erased initial losses and managed to trade in green in early afternoon deals, as traders took support with data shared by the Reserve Bank of India (RBI) showing that India's foreign exchange reserves rose for the second straight week, by $2.561 billion to $644.151 billion in the week that ended on May 10. Sentiments remained positive as India Ratings and Research expects the country's GDP growth rate for the March quarter at 6.2 per cent and around 6.9-7 per cent for the 2023-24 fiscal. The Indian economy grew 8.2 per cent in the June quarter, 8.1 per cent in the September quarter and 8.4 per cent in the December quarter of 2023-24. Adding some optimism, the EPFO's provisional payroll data showed that EPFO has added 14.41 lakh net members in the month of March, 2024. The data indicates that around 7.47 lakh new members have been enrolled during March 2024. A noticeable aspect of the data is the dominance of the 18-25 age group, constituting a significant 56.83% of the total new members added in March 2024 indicating the majority of individuals joining the organized workforce are youth, primarily first-time job seekers. However, markets failed to hold recovery and ended flat as cautious comments from US Fed officials weighed on investor sentiment. As the general election approaches its final stages, volatility is anticipated to remain elevated. Finally, the BSE Sensex fell 52.63 points or 0.07% to 73,953.31, and the CNX Nifty was up by 27.05 points or 0.12% points to 22,529.05.

The US markets ended higher on Tuesday with the S&P 500 and the Nasdaq reaching new record closing highs. Renewed confidence the Federal Reserve will lower interest rates in the coming months has contributed to the advance, but recent comments from Fed officials have once again created some uncertainty. Markets showed a lack of direction throughout much of the trading day on Tuesday. The lackluster performance on markets came as traders took a step back to assess the recent strength in the markets.  Another quiet day on the U.S. economic front have kept some traders on the sidelines ahead of the release of the minutes of the Fed's latest monetary policy meeting on Wednesday. The minutes of the April 30-May 1 meeting may shed additional light on Fed officials' thinking with regard to the outlook for rates. On the sectoral front, Reflecting the lackluster performance by the broader markets, most of the major sectors ended the day showing only modest moves. Airline stocks showed a significant move to the downside, however, with the NYSE Arca Airline Index falling by 1.8 percent. Notable weakness was also visible among networking stocks, as reflected by the 1.2 percent loss posted by the NYSE Arca Networking Index. Among individual stocks, Peloton Interactive (PTON) moved sharply lower after the exercise equipment and media company announced a global refinancing that includes an offering of $275.0 million worth of convertible senior notes due 2029.

Crude oil futures ended lower on Tuesday amid concerns about interest rates after comments from a few Fed officials suggested that the central bank might keep rates higher for a longer period. The International Energy Agency (IEA) in its report last week had trimmed its outlook for crude demand this year, citing concerns over weaker economic conditions due to pressure from interest rates. Meanwhile, traders were awaiting the OPEC+ ministerial meeting scheduled for June 1. The group will decide on its production policy. Benchmark crude oil futures for June delivery fell $1.14 or more than 1.42% to settle at $78.66 a barrel on the New York Mercantile Exchange. Brent crude for July delivery dropped $0.83 or 0.99% to $82.88 per barrel on London's Intercontinental Exchange.

Indian rupee ended higher against the U.S. dollar on Tuesday following a weak greenback against major currencies overseas and softening crude oil prices in international markets. Traders got some support after India Ratings and Research expects the country's GDP growth rate for the March quarter at 6.2 per cent and around 6.9-7 per cent for the 2023-24 fiscal. The Indian economy grew 8.2 per cent in the June quarter, 8.1 per cent in the September quarter and 8.4 per cent in the December quarter of 2023-24. Besides, EPFO's provisional payroll data showed that EPFO has added 14.41 lakh net members in the month of March, 2024. The data indicates that around 7.47 lakh new members have been enrolled during March 2024. On the global front, the dollar struggled for direction on Tuesday as investors stuck to their views for the expected timing of Federal Reserve monetary easing this year. Finally, the rupee ended at 83.32 (Provisional), stronger by 5 paise from its previous close of 83.37 on Friday.

The FIIs as per Tuesday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 16399.17 crore against gross selling of Rs 14218.46 crore, while in the debt segment, the gross purchase was of Rs 1188.96 crore with gross sales of Rs 290.87 crore. Besides, in the hybrid segment, the gross buying was of Rs 23.76 crore against gross selling of Rs 47.68 crore.

The US markets ended higher on Tuesday in advance of Nvidia Corp's quarterly results and in anticipation of the release of the minutes U.S. Federal Reserve's most recent monetary policy meeting. Asian markets are trading mostly in green on Wednesday ahead of the release of the minutes of the U.S. Federal Reserve's latest monetary policy meeting. Indian markets ended flat after altering between gains and losses on Tuesday as U.S. Federal Reserve officials tempered investor enthusiasm about potential interest-rate cuts. Today, markets are likely to get a cautious start amid lingering uncertainty about the outcome of general election results. Foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) offloaded shares worth Rs 1,874.54 crore on May 21. There will be some cautiousness as domestic rating agency ICRA projected India's GDP growth to moderate to a four quarter low of 6.7 per cent in March quarter of 2023-24 fiscal. For the full 2023-24 fiscal, ICRA estimates GDP growth to come in at 7.8 per cent. ICRA Chief Economist, Head-Research & Outreach Aditi Nayar said the lower volume growth coupled with diminishing gains from commodity prices dampening the profitability of some of the industrial sectors is expected to dampen India's GVA growth in Q4 FY2024. Traders will be concerned as the net foreign direct investment (FDI) in India -- inflows minus the outflows -- dropped sharply by 62.17 per cent to $10.58 billion in the financial year ended March 31, 2024 (FY24) from $ 27.98 billion in the previous year, reflecting higher repatriation of capital. This is the lowest amount of net FDI into the country since 2007. However, traders may take note of an article in the RBI's May Bulletin released stating that India is likely to grow by 7.5 per cent in the first quarter of the current financial year, driven by rising aggregate demand and non-food spending in the rural economy. Meanwhile, stock market regulator SEBI has issued fresh guidelines to manage the stock market impact arising out of market rumors. Travel and tourism industry stocks will be in focus as India's rank on the World Economic Forum's Travel & Tourism Development Index 2024 has risen to 39th place, with global tourism activities returning to pre-pandemic level. India is ranked highest in South Asia and among the lower-middle-income economies. There will be some reaction in aviation industry stocks after data by the Directorate General of Civil Aviation (DGCA) showed that the number of domestic air travelers in India grew 2.42 per cent year-on-year (Y-o-Y) in April, reaching 132 million. It is the slowest Y-o-Y growth in domestic air passenger traffic in at least 13 months. Moreover, investors will keenly observe the Q4 earnings announcements from major players such as Sun Pharmaceuticals, Grasim, Nykaa, and Paytm.

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

Index

Previous close

Support

Resistance

NSE Nifty

22,529.05

22,425.36

22,611.91

BSE Sensex

73,953.31

73,747.39

74,174.21

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

848.34

174.00

169.56

176.81

Coal India

273.57

490.80

475.70

499.90

Power Grid

219.77

325.00

314.85

331.30

HDFC Bank

218.85

1457.20

1448.30

1467.90

ONGC

175.60

279.90

277.50

283.15

  • Tata Motors group has raised its investment outlay for FY25 to Rs 43,000 crore for new products and technologies, with its British arm Jaguar Land Rover absorbing the maximum share.
  • Dr. Reddy's Laboratories' wholly-owned step-down subsidiary -- Dr. Reddy's Laboratories, Inc. is recalling Javygtor Powder for Oral Solution (100mg) due to it being a Sub-potent Drug.
  • ONGC has reported 77.93% rise in its consolidated net profit at Rs 11,526.53 crore for Q4FY24 as compared to Rs 6,478.23 crore for the same quarter in the previous year.
  • Hero MotoCorp is planning to expand its presence in the electric two-wheeler segment as it aims to introduce new models below its current range to cater to a broader set of customers.  

News Analysis