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Market Commentary 26 December 2022
Benchmarks likely to get positive start of F&O series expiry week


Indian equity benchmarks continued to remain under selling pressure for the fourth day running and settled with losses of over one and half percent on Friday, in tandem with weak Asian market trends as investor's sentiment remained muted in view of the Covid-19 surge in some countries. After the gap-down start, markets gradually inched lower amid fears of economic growth slowdown. Traders continued to remain concerned with former Niti Aayog Vice Chairman Arvind Panagariya's statement that cutting trade with Beijing at this juncture would amount to sacrificing India's potential economic growth amid demands for snapping trade ties with China for its transgressions on the border. Instead, he suggested that India should try to enter into free trade agreements (FTA) with countries such as the UK and the European Union to expand its trade. Key indices extended losses to end near day's low points as sentiments remained negative with RBI Monetary Policy Committee (MPC) member Jayanth R Varma's statement that India's economic growth is now 'extremely fragile' and needs all the support that it can get, as private consumption and capital investment are yet to pick up. Varma further said out of the four engines of growth for the economy, exports and government spending supported the Indian economy through the pandemic, but other engines need to pick up the baton now. Traders took note of a private report that amid a slowdown in demand for Indian goods in developed countries, India can focus on 18 products, such as insecticides, construction material, chemicals, and iron and steel, to boost its exports to developing countries where the country meets only 2.5 per cent of the demand at present. Finally, the BSE Sensex fell 980.93 points or 1.61% to 59,845.29 and the CNX Nifty was down by 320.55 points or 1.77% to 17,806.80.


The US markets ended higher on Friday after revised data from the University of Michigan showed one-year inflation expectations fell by more previously estimated in the month of December. The report showed one-year inflation expectations in December were downwardly revised to 4.4 percent from 4.6 percent. One-year inflation expectations were at the lowest level in 18 months, down sharply from 4.9 percent in November. Five-year inflation expectations in December were also downwardly revised to 2.9 percent from 3.0 percent, which was unchanged from November. Further, some support also came in as new home sales in the U.S. unexpectedly showed a sharp increase for the second consecutive month in November, according to a report released by the Commerce Department. The report said new home sales surged by 5.8 percent to an annual rate of 640,000 in November after soaring by 8.2 percent to a revised rate of 605,000 in October. Street had expected new home sales to tumble by 5.1 percent to an annual rate of 600,000 from the 632,000 originally reported for the previous month. Despite another sharp increase, new home sales in November were down by 15.3 percent compared to the same month a year ago.  On the sectoral front, oil-related stocks saw substantial strength on the day as the price of crude oil for February delivery surged $2.07 to $79.56 a barrel. Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 4.0 percent and the NYSE Arca Oil Index spiked by 2.6 percent. Natural gas stocks also benefitted from a sharp increase by the price of the commodity, with the NYSE Arca Natural Gas Index jumping by 2.6 percent.


Crude oil futures ended sharply higher on Friday on rising expectations the EU sanctions will result in a substantial drop in Russian crude supply. The EU ban on Russian crude imports and a G7 price cap on Russian seaborn oil exports came into effect in the first week of this month. This is expected to result in Russia's Baltic oil exports falling by 20% in December. Meanwhile, Russia's deputy Prime Minister Alexander Novak has reportedly said Russia is likely to cut oil output by 5-7% in early 2023. Benchmark crude oil futures for February delivery rose $2.07 or 2.67 percent at $79.56 a barrel on the New York Mercantile Exchange. Brent crude for February surged $3.56 or 4.4 percent to settle at $84.54 (Provisional) a barrel on London's Intercontinental Exchange.


Indian rupee ended marginally lower against dollar on Friday, amid steep losses in the domestic equity markets and firm crude oil prices. Traders were also concerned with RBI Monetary Policy Committee member Jayanth R Varma's statement that India's economic growth is now 'extremely fragile' and needs all the support that it can get, as private consumption and capital investment are yet to pick up. Varma further said out of the four engines of growth for the economy, exports and government spending supported the Indian economy through the pandemic, but other engines need to pick up the baton now. On the global front, the dollar was on the front foot on Friday as solid U.S. economic data reinforced the need for the Federal Reserve to stay on its aggressive monetary policy tightening path and further raised the odds of higher-for-longer rates. Finally, the rupee ended at 82.84 (Provisional), weaker by 5 paise from its previous close of 82.79 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 5463.35 crore against gross selling of Rs 4304.89 crore, while in the debt segment, the gross purchase was of Rs 228.61 crore against gross selling of Rs 148.99 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.06 crore against gross selling of Rs 10.36 crore.


The US markets ended higher on Friday as investors digested a deluge of economic data ahead of the Christmas holiday long weekend, capping a week fraught with worries over the Fed's restrictive monetary policy and related recession fears. Asian markets are trading mostly in green on Monday in thin holiday trade tracking Friday's gains on Wall Street. Indian markets ended lower with losses of over one and half a percent following across-the-board selling on Friday amidst fear of another global pandemic wave being fanned by the surging COVID cases in China. Today, start of F&O series expiry week is likely to be positive tracking gains in global peers. Traders will be taking encouragement as noting that the achievement of $5 trillion economy is a short term aspirational goal, former RBI Governor C Rangarajan said even after that India will still be known as middle income country with per capita income $3472. Also, Prime Minister Narendra Modi said that this year, the country had become the world's fifth largest economy. Some support will come with a report that foreign investors have infused a net Rs 11,557 crore in Indian equities in December so far despite a market correction and increasing concerns over re-emergence of COVID in China and some other parts of the world. Traders may take note of the International Monetary Fund's (IMF) statement that India needs a more ambitious fiscal consolidation roadmap to ensure medium-term debt sustainability amid growing risks to its growth outlook and shrinking fiscal space. However, there may be some cautiousness with a private report that India's exports may have touched an all-time high of USD 422 billion in 2021-22 but recession in key western markets and geo-political crisis due to the Russia-Ukraine war are expected to impact the growth of the country's outbound shipments in 2023. Traders may be concerned as the Reserve Bank of India's (RBI's) foreign exchange reserves declined for the first time in five weeks to $563.50 billion in the week ended December 16. There will be some buzz in gems and jewellery industry stocks with report that India's gems and jewellery industry has achieved its annual export target of USD 48 billion till the last quarter of the current financial year. Aluminium industry stocks will be in foucs as industry body Assocham sought reduction in basic customs duty and correction of inverted duty structure on critical raw materials for the aluminium industry as high import duties is a huge disadvantage for the sector heavily dependent on imported raw materials. There will be some reaction in retail industry stocks as Retailers Association of India (RAI) said India's retail industry saw a 19 per cent rise in sales over pre-pandemic levels during the April-November 2022 period riding on the back of strong performance of segments such as quick service restaurant and footwear.


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  • Reliance Industries' wholly owned subsidiary -- Reliance Strategic Business Ventures has acquired 23.3% stake in Exyn Technologies Inc for a total consideration of $25 million. 
  • NTPC and GE Power India have signed a MoU for feasibility to demonstrate technologies to reduce the carbon footprint of NTPC's existing coal fired power plants. 
  • JSW Steel has raised Rs 875 crore through the allotment of 8,750 unsecured, listed, redeemable, rated, NCDs bearing a face value of Rs 10,00,000 each. 
  • Adani Ports and SEZ's wholly owned subsidiary -- Adani Logistics has entered into JV agreement with DA Group and its affiliates for exploring opportunities in warehousing business.
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