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Market Commentary 25 January 2024
Markets likely to get cautious start on Thursday

Indian equity markets rebounded from previous day's fall and settled with strong gains on Wednesday, as strong performances from index heavyweights Tata Steel, Power Grid Corporation and HCL Technologies boosted sentiments. The markets were negative at the beginning, as provisional data from the NSE showed that foreign institutional investors (FIIs) continued to be net sellers for five days in a row, selling shares worth Rs 3,115.39 crore on January 23. However, markets soon wiped out losses and traded higher as traders took encouragement with Union Petroleum Minister Hardeep Puri's statement that the Indian economy is poised to touch $5 trillion next financial year - 2024-25 - and capitalise to double to $10 trillion by the end of this decade. Some optimism also came in as data released by the Central Board of Direct Taxes showed that the government's direct tax-to-GDP ratio stood at a 23-year high of 6.11% in FY23. The Centre's direct tax collections rose 17.8% year-on-year at Rs 16.6 trillion in FY23. However, in the afternoon deals, markets erased gains and traded marginally in red on the back of mixed cues from Asian markets amid heightened geopolitical tensions and uncertainty over when the Fed will cut rates. But, selling proved short-lived as markets once again gained traction to end higher, taking support from a private report stating that India will remain the fastest-growing major economy this year and next, boosted by continued strong government spending. It said inflation was unlikely to surge again. Some support also came as India's business activity expanded at the fastest pace in four months in January on stronger demand. HSBC's flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 61.0 this month, its highest since September, from December's final reading of 58.5. Finally, the BSE Sensex rose 689.76 points or 0.98% to 71,060.31 and the CNX Nifty was up by 215.15 points or 1.01% to 21,453.95.

The US markets ended mostly higher on Wednesday. The S&P 500 crept up to a new record closing high and the Nasdaq reached its best closing level in over two years. Technology stocks helped lead the way higher in early trading on markets, with shares of Netflix (NFLX) soaring by 10.7 percent on the day. Netflix rallied after the streaming giant reported better than expected fourth quarter revenues on stronger than expected subscriber growth. Dutch chip equipment maker ASML (ASML) also spiked by 8.9 percent after reporting better than expected fourth quarter results. However, buying interest waned over the course of the session potentially reflecting renewed interest rate concerns amid a rebound by treasury yields.  Yields moved lower early in the session but showed a significant turnaround as the day progressed following some upbeat U.S. economic data and a disappointing five-year note auction. On the sectoral front, despite the pullback by the broader markets, oil service stocks continue to see substantial strength resulting in a 3.1 percent spike by the Philadelphia Oil Service Index. The rally by oil service stocks came as the price of crude oil for March delivery climbing $0.72 to $75.09 a barrel following the release of a report showing a much bigger than expected weekly decrease in crude oil inventories. Significant strength also remained visible among semiconductor stocks, as reflected by the 1.5 percent gain posted by the Philadelphia Semiconductor Index. The index reached a new record closing high. On the economic data front, continuing to signal underlying weakness in the U.S. economy, the Conference Board released a report showing a modest decrease by its index of leading U.S. economic indicators in the month of December. The Conference Board said its leading economic index edged down by 0.1 percent in December after falling by 0.5 percent in November. Street had expected the index to decrease by 0.3 percent. The report said the lagging economic index also dipped by 0.2 percent in December following a 0.5 percent increase in November.

Crude oil futures ended higher on Wednesday on optimism about increased demand from China after announcement of stimulus. In China, the People's Bank of China said it will cut the amount of cash that banks must hold as reserves from February 5, freeing up an estimated 1 trillion yuan ($140 billion) to the market. Further, oil prices also climbed on data showing a larger-than-expected decline in U.S. crude inventories. Data released by U.S. Energy Information Administration (EIA) showed crude inventory dropped by 9.2 million barrels in the week ended January 19th, more than four times the expected declined of 2.2 million barrels. Benchmark crude oil futures for February delivery rose $0.72 or 1 percent to settle at $75.09 a barrel on the New York Mercantile Exchange. Brent crude for March delivery gained $0.49 or 0.6 percent to settle at $80.04 a barrel on London's Intercontinental Exchange.  

Indian rupee ended higher against the dollar on Wednesday as positive domestic markets and a soft US dollar supported the rupee while rising crude oil prices and foreign fund outflows capped gains. Traders took support as data released by the Central Board of Direct Taxes showed that the government's direct tax-to-GDP ratio stood at a 23-year high of 6.11% in FY23. The Centre's direct tax collections rose 17.8% year-on-year at Rs 16.6 trillion in FY23. Meanwhile, the first ever HSBC Flash India PMI data showing that the health of the Indian private sector economy improved substantially in January, as a sharper upturn in new work intakes fuelled output growth. The headline HSBC Flash India Composite PMI Output Index - a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors - was at 61.0 in January, inside expansion territory for the thirtieth successive month. On the global front, yen rose on Wednesday as Japanese bond yields climbed sharply on hopes that ultra-loose monetary policy will soon end, while the dollar fell as the euro and pound advanced. Finally, the rupee ended at 83.13 (Provisional), stronger by 2 paise from its previous close of 83.15 on Tuesday.

The FIIs as per Wednesday'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 26680.79 crore against gross selling of Rs 29387.99 crore, while in the debt segment, the gross purchase was of Rs 1595.45 crore with gross sales of Rs 846.84 crore. Besides, in the hybrid segment, the gross buying was of Rs 75.65 crore against gross selling of Rs 70.32 crore.

The US markets ended mostly higher on Wednesday as Netflix surged following blowout quarterly results and a strong report from ASML fuelled gains in chipmakers. Asian markets are trading mixed on Thursday as investors assessed South Korea's gross domestic product numbers and markets respond to China's central bank cutting reserve requirements for the country's lenders. Indian markets ended volatile session with notable gains of around a percent each on Wednesday amid buying in index heavyweights. Today, markets are likely to get cautious start amid mixed global cues. Investors are likely to remain on sidelines as there will be some volatility in the markets amid the monthly expiry of the January F&O contracts. Market participants are likely to keep close eye on earnings of the companies to be out later in the day for more directional cues. Persistent foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) maintained selling pressure in the cash segment for six days in a row, offloading shares worth Rs 6,934.93 crore on January 24, provisional data from the NSE showed. Meanwhile, the Economic Research Department of the State Bank of India (SBI) has released a comprehensive research report forecasting the fiscal scenario for the upcoming financial years. According to the report, the fiscal deficit for the fiscal year 2024-25 is anticipated to be set close to 5.5 per cent of the Gross Domestic Product (GDP). However, some respite may come later in the day as rating agency ICRA revised upwards its projections for bank credit growth for the current financial year (FY24) to 14.9-15.3 per cent from an earlier estimate of 12.8-13.0 per cent on the back of strong offtake in the retail segment and non-banking finance companies (NBFCs). Anil Gupta, Senior Vice President at ICRA, said the retail credit and bank lending to NBFCs have been strong in the nine months ended December 2023, which has led to the revision. The incremental credit is expected to be Rs 20.4-20.9 trillion as against an earlier estimate of incremental Rs 17.5-17.8 trillion in FY24. This will be the highest ever incremental bank credit growth and would surpass the previous high of Rs 18.2 trillion (growth of 15.4 per cent Y-o-Y in FY23). Some support will also come as the India Meteorological Department (IMD) expects the persisting El Nino conditions to turn neutral prior to the start of monsoon season in June. Neutral El Nino conditions imply that it would not have an adverse impact on the monsoon rains next season. Auto stocks will be in focus with a private report that the Passenger Vehicles (PV) segment volumes are expected to log a record 8-10 per cent growth this fiscal as the pent-up demand levels off amid hike in vehicle prices. There will be some reaction coal industry stocks as the government approved an outlay of Rs 8,500 crore as financial assistance for promoting coal, lignite gasification projects.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,453.95

21,233.31

21,578.46

BSE Sensex

71,060.31

70,324.73

71,472.74

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

HDFC Bank

430.02

1456.30

1404.89

1483.09

Tata Steel

393.40

134.90

131.49

136.94

ICICI Bank

345.79

998.30

984.65

1023.95

Power Grid

283.10

245.70

238.14

250.14

NTPC

239.22

308.65

301.04

313.49

  • Infosys is advancing its AI footprint at the 2024 Australian Open with generative AI technologies for fan engagement, player performance, and digital content creation.
  • HCL Technologies has received the AWS Financial Services Competency in recognition of its commitment to delivering world-class, cloud-based offerings.
  • ONGC has received approval from the Petroleum and Natural Gas Ministry for formation of a wholly-owned subsidiary company for green energy and gas business.
  • Bharti Airtel has prepaid Rs 8,325 crore to the Department of Telecom towards part prepayment of the deferred liabilities pertaining to spectrum acquired in auction of year 2015.

News Analysis