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Market Commentary 24 May 2022
Benchmarks to make flat-to-positive start on Tuesday

 

Indian benchmark indices failed to hold on to their early upsurge and simply lost track to end marginally lower on Monday, dragged by heavy losses in Metal, Basic Materials and Oil & Gas stocks. After making cautious start markets soon traded higher, as traders found some solace with the commerce and industry ministry stating that total foreign direct investment into India rose 2 per cent to the highest ever $83.57 billion in 2021-22 on account of various measures like policy reforms and ease of doing business taken by the government. Sentiments got up-beat with private report stated that India Inc seems to be optimistic about opening of new vacancies amid steady hiring trends during the current financial year as the country's economy is on a growth trajectory. It said at least 72 per cent organisations which participated in a survey believed that there will be more hiring's for new positions during this fiscal. Some support also came as retirement fund body EPFO has added 15.32 lakh subscribers in March 2022, over 19 percent more than 12.85 lakh enrolled in February this year. Domestic sentiments remained optimistic in afternoon deals, amid a private report stating that the Union government's move to cut excise duty on petrol and diesel by Rs 8 and Rs 6 a litre, respectively, is likely to ease the retail inflation rate by up to 25 basis points (bps) from June onwards. If the move's indirect impact on other items, including food prices, is also considered, the average inflation rate may reduce by 40 basis points during the current fiscal year. However, key gauges erased all of their gains to end lower as traders tuned cautious with report that the outflow of funds from domestic markets has continued as Foreign Portfolio Investors (FPI) remain net sellers. So far in the month of May, FPIs have pulled out Rs 37,216 crore as headwinds such as tighter monetary policy and rising inflation force investors towards safer havens. Some concern also came as RBI data showed the country's foreign exchange reserves declined by $2.676 billion to stand at $593.279 billion in the week ended May 13, 2022. Finally, the BSE Sensex fell 37.78 points or 0.07% to 54,288.61 and the CNX Nifty was down by 51.45 points or 0.32% to 16,214.70.  

 

The US markets ended higher on Monday as traders continued to pick up stocks at reduced levels. Further, buying interest have also been generated in reaction to news the financial hub of Shanghai has lifted some of its COVID-19 restrictions and US President Joe Biden said he was weighing cutting tariffs on Chinese goods. Biden said I am considering it. We did not impose any of those tariffs. They were imposed by the last administration and they're under consideration. Besides, banking stocks helped to lead the rebound on Wall Street, with the KBW Bank Index spiking by 4.1 percent on the day. Substantial strength was also visible among oil service stocks, as reflected by the 4.8 percent jump by the Philadelphia Oil Service Index. The rally by oil service stocks comes even though the price of crude oil ended the day flat. Steel stocks also turned in a strong performance on the day, driving the NYSE Arca Steel Index up by 2.6 percent. Brokerage, telecom and natural gas stocks also saw significant strength, moving higher along with most of the other major sectors. Among individual stocks, shares of VMWare  moved sharply higher following reports the cloud computing company is in advanced talks to be acquired by chipmaker Broadcom.

 

Crude oil futures ended marginally higher on Monday on hopes of increased demand from China as Shanghai lifted some of its restrictions after a two-month lockdown. Further, a weaker dollar too aided oil's uptick. Meanwhile, the US Administration is considering the potential release of diesel from a rarely used emergency stockpile as President Biden scrambles to tame soaring fuel prices amid low inventory levels ahead of the summer driving season. Benchmark crude oil futures for July delivery added 1 cent or 0.01% percent to settle at $110.29 a barrel on the New York Mercantile Exchange. Brent crude for July delivery surged 87 cents or 0.7 percent to settle at $113.42 a barrel on London's Intercontinental Exchange.

 

Erasing previous session losses, Indian rupee ended substantially stronger on fresh selling of American currency by banks and exporters. Sentiments were upbeat as commerce and industry ministry said that total foreign direct investment (FDI) into India rose 2 per cent to the highest ever $83.57 billion in 2021-22 on account of various measures like policy reforms and ease of doing business taken by the government. Total FDI comprises equity inflows, reinvested earnings and other capital. In 2020-21, the inflow stood at $81.97 billion. It was $74.39 billion in 2019-20 and $62 billion in 2018-19. However, unabated foreign fund outflows and firm crude oil prices weighed on the rupee and limit the gains. On the global front, euro rallied on Monday after the European Central Bank president said policymakers would likely to lift interest rates out of the negative territory by September. Finally, the rupee ended at 77.55 (Provisional), stronger by 15 paise from its previous close of 77.70 on Friday.

 

The FIIs as per Monday's data were net buyers in equity and debt segment both. In equity segment, the gross buying was of Rs 11207.37 crore against gross selling of Rs 9751.60 crore, while in the debt segment, the gross purchase was of Rs 141.21 crore with gross sales of Rs 54.97 crore. Besides, in the hybrid segment, the gross buying was of Rs 3.46 crore against gross selling of Rs 7.75 crore.

 

The US markets ended higher on Monday as gains from banks and a rebound in market-leading tech shares supported a broad-based rally. Asian markets are trading mostly in red on Tuesday as relief at a rally on Wall Street was quickly soured by a slide in U.S. stock futures. Indian markets erased all intraday gains on Monday and ended flat with a negative bias on Monday amid selling in index heavyweights like Tata Steel, HDFC twins, and ITC. Today, domestic indices are likely to get flat-to-positive start tracking overnight gains on Wall Street. Traders will be taking encouragement with Niti Aayog CEO Amitabh Kant's statement that India is in the midst of a major transformation in the digital space, and a strong political leadership and the commitment to continue with radical reforms would play a key role in taking the country to a leadership role in the global economy. He added a slew of radical reforms has been carried out by India in the recent years that have put India on a growth trajectory for many decades to come. Some support may come with a private report that the government's cut in the fuel tax and measures to cool prices of iron, steel, coal, plastics and cement may drive down retail inflation in the short term. However, traders may be concerned as the data from the Department for Promotion of Industry and Internal Trade (DPIIT) showed that FDI equity inflows into India contracted marginally by 1 per cent to $58.77 billion during 2021-22, as compared to equity inflows of $59.63 billion during 2020-21. There may be some cautiousness as ICRA Ratings said the economic growth may have slowed to 3.5 per cent in fourth quarter of 2021-22 from 5.4 per cent in the previous three-month period due to the impact of higher commodity prices on margins, decline in wheat yields and on higher base. The agency said the hiccups in the recovery of the contact-intensive services attributable to the third wave of COVID-19 in the country may have also affected the economic growth in the quarter. Metal stocks will be in focus as Icra reacting to the duty-related measures taken by the government said the domestic steel sector has been hit by a moving train. The government had hiked the duty on exports of iron ore by up to 50 per cent and a few steel intermediaries to 15 per cent. Meanwhile, market debut of logistics giant Delhivery will be in focus. The company had raised Rs 5,235 crore through its IPO. The issue was subscribed 1.63 times and the issue price has been fixed at Rs 487 per share. Venus Pipes & Tubes will also be making its debut today. The small sized (Rs 165.42 crore) IPO was subscribed 16.3 times.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

16,214.70

16,128.74

16,357.69

BSE Sensex

54,288.61

54,009.68

54,749.43

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

273.88

1026.35

986.26

1,081.71

NTPC

260.55

149.75

146.99

153.94

ITC

217.00

273.60

270.95

278.35

Oil & Natural Gas Corporation

180.29

155.10

151.76

161.31

JSW Steel

175.54

547.75

525.50

582.00

 

  • Power Grid Corporation of India has reported 17.87% rise in its consolidated net profit at Rs 4,156.44 crore for Q4FY22 as compared to Rs 3,526.23 crore for the same quarter in Q4FY21. 
  • Tata Motors and Tata Power Company have joined hands for the development of a 7 MWp solar rooftop project at Tata Motors' Passenger Vehicle Plant in Chikhali, Pune. 
  • GAIL (India) has laid a dedicated pipeline to supply natural gas to HMEL Bathinda refinery in Punjab as it looks to take the environment-friendly fuel to all corners of the country. 
  • UPL has launched ZOATIN, a new biosolution that effectively facilitates plant uptake and utilisation of phosphorus to improve crop health and yield.
News Analysis