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Market Commentary 25 October 2021
Markets likely to get flat-to-positive start amid mixed Asian cues

 

Indian equity benchmarks ended in the red for the fourth consecutive day on Friday, amid volatility, due to selling pressure in heavyweights such as ITC, Maruti Suzuki and Infosys. The benchmark indices had a gap-up opening on the back of positive global cues. Traders got encouragement as Icra Rating has said that the economy finally looks nearly out of the pandemic woods, helping the Q2 GDP print at 7.7 per cent, with half of the 15 high-frequency indicators recovering to the pre-pandemic levels in the second quarter. Some solace also came with Commerce and Industry Minister Piyush Goyal's statement that all indicators, including GDP, foreign direct investment (FDI) inflows and exports growth, are pointing towards a clear and sharp economic recovery in the country. Adding more optimism, Union Minister Hardeep Singh Puri has exuded confidence that India will become a $5-trillion economy by 2024-25 and $10-trillion by 2030. On economic growth momentum, he said petrol consumption is 16% higher than pre-COVID levels, while diesel consumption is 10-12% higher. He noted that even the stock market has registered a growth of 250% since March 2020. However, markets were unable to sustain their early gains and slipped into the negative zone in noon deals, as traders turned cautious as Union Power Secretary Alok Kumar stressed on the need to have strategic fuel reserves to insulate the nation from supply shocks for at least a month, in the backdrop of the ongoing coal shortage at power plants in the country. Some concern also came with private report stating that the number of organisations in the country are concerned that their existing data protection solutions will not meet all future business challenges, including cyber threats. However, losses remain capped as some optimism remained among traders with Niti Aayog Vice Chairman Rajiv Kumar's statement that Indian economy is expected to grow 10.5 percent or more in the current fiscal. He also said that modernisation of the retail sector is very much on the cards. Finally, the BSE Sensex fell 101.88 points or 0.17% to 60,821.62 and the CNX Nifty was down by 63.20 points or 0.35% to 18,114.90.

 

The US markets ended mostly lower on Friday the tech-heavy Nasdaq moved to the downside, while the Dow reached a new record closing high. Weakness on Wall Street came as traders reacted to mixed earnings news from several big-name companies. A steep drop by Intel (INTC) weighed on the Nasdaq, with the semiconductor giant plunging by 11.7 percent after ending the previous session at its best closing level in three months. Intel came under pressure after reporting quarter earnings that beat estimates but weaker than expected sales. The company also warned of lower profit margins over the next few years. Snapchat parent Snap (SNAP) also saw substantial weakness after reporting mixed third quarter results and warning changes to Apple's iOS privacy rules will lead to slower growth. On the other hand, a rally by shares of American Express (AXP) contributed to the uptick by the Dow, with the financial services giant jumping by 5.5 percent after reporting third quarter results that exceeded expectations on both the top and bottom lines. However, overall trading activity was somewhat subdued with a lack of major U.S. economic data keeping some traders on the sidelines. On the sectoral front, Snap led a sell-off in the internet sector, resulting in a 3.2 percent nosedive by the Dow Jones U.S. Internet Index. Substantial weakness was also visible among airline stocks, as reflected by the 1.9 percent slump by the NYSE Arca Airline Index. Meanwhile, banking stocks showed a strong move to the upside, driving the KBW Bank Index up by 1.5 percent.

 

Crude oil futures ended significantly higher on Friday, with U.S. prices tallying a record streak of weekly gains, on the back of easing travel restrictions, a slow recovery in U.S. crude production and expectations for higher energy demand for the holidays. A report from the U.S. Energy Information Administration (EIA) showed crude and fuel inventories tightened, with crude inventories at the Cushing storage hub falling to 31.2 million barrels, their lowest level since October 2018, despite refinery crude runs having fallen in the week to October 15. According to a report from Baker Hughes, U.S. oil and gas rig count fell by 1 to 542 this week. Despite this week's decline, the total rig count was still up 255 rigs, or 89%, over this time last year. U.S. oil rigs fell 2 to 443 this week, while gas rigs rose 1 to 99. Benchmark Crude oil futures for December delivery rose $1.26 or 1.5 percent to settle at $83.76 barrel on the New York Mercantile Exchange. Brent crude for December delivery gained 92 cents or 1.1 percent to settle at $85.53 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended marginally weaker against the US dollar on Friday, on increased demand for the greenback from importers and banks. Losses in equity markets also created pressure on domestic currency. However, downfall remained capped with Piyush Goyal's statement that all indicators, including GDP, foreign direct investment (FDI) inflows and exports growth, are pointing towards a clear and sharp economic recovery in the country. Meanwhile, Union Minister Hardeep Singh Puri has exuded confidence that India will become a $5-trillion economy by 2024-25 and $10-trillion by 2030. On the global front, pound dipped slightly on Friday after weaker-than-expected retail sales numbers but remained close to recent highs after recent survey data and policymaker comments underlined the threat of further inflationary pressure. Finally, the rupee ended 74.90, weaker by 3 paise from its previous close of 74.87 on Thursday.

 

The FIIs as per Friday's data were net seller in both equity and debt segment. In equity segment, the gross buying was of Rs 11532.41 crore against gross selling of Rs 13947.77 crore, while in the debt segment, the gross purchase was of Rs 670.42 crore with gross sales of Rs 1010.35 crore. Besides, in the hybrid segment, the gross buying was of Rs 92.61 crore against gross selling of Rs 64.86 crore.

 

The US markets ended mostly lower on Friday after comments on stimulus tapering from Federal Reserve Chair Jerome Powell spooked markets trading at record levels. Asian markets are trading mixed on Monday ahead of a week packed with major quarterly earnings announcements. Indian markets ended lower on Friday extending losses to the fourth session in a row. Losses in auto, metal, IT and pharma shares dragged the market lower though gains in banking shares limited the downside. Today, start of new week is likely to be flat-to-positive amid mixed global cues. Markets may witness volatility this week amid derivatives expiry on Thursday. Traders will be getting encouragement as Industry chamber PHDCCI said it expects strong GDP growth in the coming quarters with the economic recovery gaining momentum. Out of the 12 lead economic and business indicators of QET (Quick Economic Trends), tracked by the industry body, nine have shown an uptick in the sequential growth for the month of September 2021 as compared to six showing the uptrend in August 2021. Some support will come as India Ratings & Research (Ind-Ra) in a report said the recently-concluded normal monsoon season will provide a much-needed cushion to both India's agriculture and inflation in 2021-22. Meanwhile, the government may introduce two key financial sector bills, including the proposed law for facilitating privatisation of public sector banks as announced by the finance minister in the Budget. However, there may be some cautiousness as in its recent Regional Economic Outlook (REO), the IMF notes that the pandemic has taken a turn for the worse in Asia since the spring, along with the region's growth outlook. The growth projection for the Asia and Pacific region is downgraded by more than 1 percent to 6.5 percent compared to the April 2021 forecasts--more than for any other region. Traders may be concerned as foreign portfolio investors (FPIs) have turned net sellers in Indian market by pulling out Rs 3,825 crore in October so far. There will be some buzz in power stocks as the Ministry of Power announced new rules to sustain economic viability of the sector, ease financial stress of various stakeholders and ensure timely recovery of costs involved in electricity generation. Real estate industry stocks will be in focus as Niti Aayog CEO Amitabh Kant said the real estate sector plays a multiplier effect in the development of the economy and is expected to reach a market size of $1 trillion by 2030, accounting for 18-20 per cent of India's GDP. There will be some reaction in textile industry stocks as Union Minister Piyush Goyal reviewed the Amended Technology Up-gradation Fund Scheme (ATUFS) to boost the Indian textile industry by enabling the ease of doing business, bolstering exports and fuelling employment. Meanwhile, FSN E-Commerce Ventures, the parent company of Nykaa, will launch its IPO on Thursday, October 28, to raise over Rs 5,355 crore at a price band of Rs 1,085-1,125 per share. There will be some important earnings announcements too to keep the markets buzzing.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

18,114.90

17,994.75

18,274.65

BSE Sensex

60,821.62

60,441.81

61,310.79

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Motors

427.42

490.90

481.96

505.26

ITC

355.37

236.60

231.60

243.70

Oil & Natural Gas Corporation

273.17

157.05

154.91

158.76

State Bank of India

240.80

502.95

499.06

507.76

Hindalco Industries

193.92

470.45

459.30

486.80

 

  • Wipro has signed a multi-year global strategic IT and digital deal with London - headquartered National Grid to accelerate their digital innovation journey. 
  • Kotak Mahindra Bank has entered into a partnership with Pine Labs. 
  • IOC is aiming refinery run to reach 100 per cent within a quarter as fuel demand returns. 
  • HDFC Bank, Mastercard, U.S. International DFC, and USAID have launched a $100 million credit facility to promote and encourage small businesses in India.
News Analysis