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NSE Intra-day chart (22 July 2022)
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Market Commentary 25 July 2022
Markets likely to get cautious start amid weak global cues


Indian equity benchmarks extended their gains for the sixth consecutive session and ended over half a percent higher on Friday led by gains in Banking, Basic Materials and FMCG stocks.  Key gauges made positive start and stayed in green for whole day, as provisional data available on the NSE showed that Foreign institutional investors (FIIs) have net purchased shares worth Rs 1,799.32 crore, continuing buying for the fourth consecutive session on July 21. Traders also took note of Commerce Secretary BVR Subrahmanyam's statement that the negotiations for the India-UK free trade agreement will be concluded by August 31 and ready for signing by Diwali in October. However, key gauges trimmed some gains in late morning deals, as traders turned cautious with the FICCI's quarterly survey showed that the Indian economy is expected to expand 7% in fiscal 2022/23, slower than a previous estimate of 7.4% and the central bank's 7.2% projection. The survey said the war in Ukraine is likely to keep inflation high and dent consumer demand. Also, the Asian Development Bank has slashed its growth forecast for India to 7.2 per cent for FY23 from 7.5 per cent estimated earlier citing higher than anticipated inflation since April and subsequent monetary tightening by the central bank. But, markets gained traction in late afternoon deals, as some optimism remained among traders with Reserve Bank Governor Shaktikanta Das' statement that the RBI was confident of achieving its growth-inflation aim of ensuring a soft landing for the economy, where inflation is brought down closer to the target of 4 percent over a period of time. At the same time, the growth sacrifice is within manageable limits. Meanwhile, capital markets regulator Sebi has proposed a regulatory framework for the online bond platforms that are selling listed debt securities. Under the proposal, bond platforms should register as stock brokers (debt segment) with the Securities and Exchange Board of India (Sebi) or be run by Sebi-registered brokers. Finally, the BSE Sensex rose 390.28 points or 0.70% to 56,072.23 and the CNX Nifty was up by 114.20 points or 0.69% to 16,719.45.


The US markets settled lower on Friday with tech-heavy Nasdaq losing over a percent. A steep drop by shares of Snap Inc. (SNAP) weighed on the tech-heavy Nasdaq, with the Snapchat parent plunging by 39.1 percent to a two-year closing low. The nosedive by Snap came after the company reported disappointing second quarter results and declined to provide guidance due amid incredibly challenging conditions. Snap also announced plans to substantially slow its rate of hiring. Social media giant Twitter (TWTR) also reported second quarter results that missed analyst estimates, citing advertising industry headwinds and uncertainty related to the pending acquisition by Elon Musk. Computer hardware stocks also showed a substantial move to the downside on the day, dragging the NYSE Arca Computer Hardware Index down by 3.1 percent. The index ended Thursday's trading at its best closing level in over a month. Significant weakness was also visible among semiconductor stocks, as reflected by the 2.6 percent slump by the Philadelphia Semiconductor Index. The index also pulled back off a one-month closing high. Outside of the tech sector, airline stocks extended the sell-off seen during trading on Thursday, resulting in a 2.8 percent nosedive by the NYSE Arca Airline Index. Traders remained sidelined as they looked ahead to next week's highly anticipated monetary policy decision by the Federal Reserve. The Fed is widely expected to raise interest rates by at least 75 basis points as part of its ongoing efforts to combat elevated inflation. Investors are eyeing reports on consumer confidence, new home sales, durable goods orders, second quarter GDP and personal income and spending.


Crude oil futures ended lower on Friday on concerns about outlook for energy demand. Also, easing concerns about supply following resumption of oil exports from Libya, and the Russian supply of natural gas to Europe through the Nord Stream pipeline weighed on oil prices. A report from Energy Information Administration shows gasoline demand has dropped almost 8% from the previous year. According to the report from Baker Hughes, the oil and gas rig count in the U.S. rose by two to 758 in the week, the highest level since March 2020. The Baker Hughes has warned that the demand outlook for the next 12 to 18 months was deteriorating. Benchmark crude oil futures for September delivery fell $1.65 or about 1.7 percent to settle at $94.70 a barrel on the New York Mercantile Exchange. Brent crude for September delivery lost $0.65 or 0.64 percent to settle at $103.21 a barrel on London's Intercontinental Exchange.


Snapping previous day's gaining streak, Indian rupee ended weaker against dollar on Friday with fresh dollar demand by banks and importers. Traders were worried as FICCI's quarterly survey showed that the Indian economy is expected to expand 7% in fiscal 2022/23, slower than a previous estimate of 7.4% and the central bank's 7.2% projection. The survey said the war in Ukraine is likely to keep inflation high and dent consumer demand. Also, the Asian Development Bank has slashed its growth forecast for India to 7.2 per cent for FY23 from 7.5 per cent estimated earlier citing higher than anticipated inflation since April and subsequent monetary tightening by the central bank. On the global front, euro continued its retreat on Friday from a more-than-two-week high as disappointing activity data from France and Germany pushed the single currency lower, a day after the European Central Bank raised interest rates for the first time since 2011. Finally, the rupee ended at 79.90 (provisional), weaker by 5 paisa from its previous close of 79.85 on Thursday.


The FIIs as per Friday's data were net buyers in both equity and debt segment. In equity segment, the gross buying was of Rs 8274.08 crore against gross selling of Rs 6399.10 crore, while in the debt segment, the gross purchase was of Rs 1422.33 crore against gross selling of Rs 925.75 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.74 crore against gross selling of Rs 12.18 crore.


The US markets ended lower on Friday as disappointing earnings from Snap spooked investors, triggering selling pressure in social media and ad tech stocks. Asian markets are trading mixed on Monday as worries about a global economic downturn sapped investors' risk appetite. Indian markets clocked their highest closing levels in nearly three months on Friday, continuing a winning streak for the sixth session in a row, boosted by gains in financial stocks. Today, the start of the crucial F&O series expiry week is likely to be a bit cautious tailing the weakness in other global markets. There will be some cautiousness with a private report that Indian rupee may further depreciate to 82 to a dollar in the near term due to widening of trade deficit and expected aggressive rate hike by the US Fed later this week to tame record high inflation. However, some support may come as Finance Minister Nirmala Sitharaman said that the trust-based taxation system introduced by the government has resulted in improved collections and increase in the number of return filings. Direct tax collections surged to Rs 14.09 lakh crore in 2021-22, registering a year-on-year growth of 49.02 per cent on the back of strong growth in mop-up from individual and corporation tax. Traders may take note of Reserve Bank of India Governor Shaktikanta Das' statement that the central bank will ensure that the economy has a soft landing wherein inflation is closer to 4 per cent, with minimal impact on growth. Meanwhile, GST on pre-packaged goods/ food packets was levied after some states gave feedback of losing revenues they previously earned from levy of VAT on food items. The decision to levy the tax, which came into effect from July 18, is not that of the Union government but of the GST Council. It was considered by the Fitment Committee that has officers of some states and the centre. Sugar industry stocks were in focus as Indian Sugar Mills Association (ISMA) in its latest report stated that India's sugar production may fall slightly to 355 lakh tonnes in the 2022-23 marketing year starting October, due to diversion of sugarcane towards ethanol manufacturing. There will be some reaction in fertilizer industry stocks with a private report that the government may revise the budget estimate (BE) for fertiliser subsidy in the current fiscal year by around 140% to Rs 2.5 trillion, as elevated global prices of fertilisers and natural gas, the key feedstock, have inflated costs. Banking stocks will be in limelight with India ratings report that banks are unlikely to take a big hit on profitability this quarter due to rising bond yields, which may eat up 5.3 per cent (Rs 11,790 crore) of their net income in the worst-case scenario.


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



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