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Market Commentary 27 October 2022
Markets likely to get positive start tracking Asian peers

 

Last hour selling dragged Indian equity markets to end near day's low points on Tuesday, with Sensex and Nifty closing lower by around half a percent each. After a positive start, markets soon turned negative, as the Finance Ministry's Economic Review stated that inflation might witness another resurgence in case of deterioration of geo-political situation leading to higher global energy prices and supply chain pressures. Adding more worries among traders, the RBI said India's forex reserves dropped by $4.50 billion to $528.37 billion for the week ended October 14. Weak trade continued over the Dalal Street for the most part of the session, on the back of negative cues from the global markets. Traders were concerned on private report stating that the government will not infuse any capital into public sector banks (PSBs) this financial year (FY23). This will happen for the first time since FY08. Some cautiousness also came as foreign investors have pulled out close to Rs 6,000 crore from the Indian equity markets so far this month in the wake of strength in the US dollar against the rupee. In the last hour of the trade, markets added more losses, amid a private report stating that owing to decreased funding and crashes in late-stage deals, several startups in India may lose their Unicorn status. A company with a valuation of over $1 billion is considered to be a Unicorn in India. Besides, the finance ministry said that Indian fiscal and monetary authorities must remain watchful even as the nation is one of the bright spots amid a gloomy global scenario where the dark clouds of recession gather. Finally, the BSE Sensex fell 287.70 points or 0.48% to 59,543.96 and the CNX Nifty was down by 74.40 points or 0.42% to 17,656.35.

 

The US markets settled mostly in red on Wednesday, with Nasdaq ending cut of over two percent, amid a negative reaction to earnings news from tech giants Microsoft and Alphabet. Shares of Microsoft tumbled by 7.7 percent after the software giant reported better than expected results but provided disappointing guidance. Google parent Alphabet also plunged by 9.1 percent after reporting third quarter results that missed street estimates on both the top and bottom lines. Besides, weakness also prevailed in the markets as the Commerce Department released a report showing new home sales in the US pulled back sharply in September after unexpectedly skyrocketing in August, although the decrease was smaller than expected. The report showed new home sales tumbled by 10.9 percent to an annual rate of 603,000 in September after soaring by 24.7 percent to a revised rate of 677,000 in August. Street had expected new home sales to plunge by 14.6 percent to a rate of 585,000 from the 685,000 originally reported for the previous month. On the sectoral front, despite the pullback by the broader indices, tobacco stocks moved sharply higher on the day, driving the NYSE Arca Tobacco Index up by 6.3 percent to its best closing level in well over a month. Substantial strength was also visible among oil service stocks, as reflected by the 4.8 percent spike by the Philadelphia Oil Service Index. The index shot up to a four-month closing high. The rally by oil service stocks came amid a notable increase by the price of crude oil, with crude for December delivery surging $2.59 to $87.91 a barrel. An increase by the price of gold also contributed to considerable strength among gold stocks, resulting in a 3.0 percent jump by the NYSE Arca Gold Bugs Index.

 

Crude oil futures ended sharply higher on Wednesday as EIA in its latest data showed a drop in gasoline stockpiles and a weak US dollar. The dollar shed ground as weak US data released overnight fueled speculation of a less hawkish Fed. Data showed US consumer confidence ebbed in October and home prices fell sharply in August, adding to recent signs that the Fed's aggressive tightening stance was starting to cool the world's largest economy. Data from the Energy Information Administration (EIA) showed that Gasoline stockpiles fell by 1.478 million barrels last week October 21, nearly twice the expected drop of 0.805 million barrels. However, it showed crude oil stockpiles in the US increased by about 2.6 million barrels in the week ended October 21, well above an expected increase of 1.0 million barrels. Benchmark crude oil futures for December delivery rose $2.59 or 3 percent at $87.91 a barrel on the New York Mercantile Exchange. Brent crude for December delivery surged $2.04 or about 2.22 percent to settle at $93.78 (Provisional) a barrel on London's Intercontinental Exchange. 

 

Indian rupee appreciated significantly against dollar on Tuesday, amid easing crude oil prices. Traders found support after the finance ministry in its monthly economic review stated that India's growth and stability concerns are less than that of the world at large, and estimated the country's medium-term growth rate above 6 percent. Traders ignored reports that India's forex reserves dropped by $4.50 billion to $528.37 billion for the week ended October 14. On the global front, Sterling rose on Tuesday, supported by improved risk sentiment as Rishi Sunak became Britain's prime minister, while the euro steadied ahead of an expected rate increase by the European Central Bank (ECB) on Thursday. Finally, the rupee ended at 82.81 (Provisional), stronger by 7 paisa from its previous close of 82.88 on Friday.

 

The FIIs as per Tuesday's data were net buyers in equity segment, while net sellers in debt segment. In equity segment, the gross buying was of Rs 9235.31 crore against gross selling of Rs 8658.94 crore, while in the debt segment, the gross purchase was of Rs 664.82 crore against gross selling of Rs 698.49 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.89 crore against gross selling of Rs 10.66 crore.

 

The US markets ended mostly in red on Wednesday as gloomy earnings guidance added to growing fears of a global economic slowdown. Asian markets are trading mostly in green on Thursday as investors digest economic data in the region. Indian markets snapped 7-day winning streak and ended lower on Tuesday as investors reassessed risks such as hawkish central bank policies and prospects of an earnings downgrade. Today, the start of the F&O series expiry session is likely to be in green tracking other Asian counterparts. However, the expiry day is very much likely to bring in volatility later in the day. Some support will come as S&P Global Market Intelligence said Asia-Pacific region, which produces 35 per cent of the world GDP, is expected to dominate global economic growth in 2023, supported by regional free-trade agreements, efficient supply chains, and competitive costs. It also said Southeast Asia and India will benefit from trade diversification away from mainland China. Besides, describing India as an economic superpower, Britain said that it was working towards the best Free Trade Agreement (FTA) that is beneficial to both the countries. However, some cautiousness may come as formal job creation in India slowed down in August after remaining buoyant for the last four months across the Employees' Provident Fund Organisation, the Employees' State Insurance Corporation and the National Pension Scheme. Meanwhile, foreign institutional investors (FIIs) net sold shares worth Rs 247.01 crore on October 25, provisional data available on the NSE shows. There will be some buzz in telecom stocks as Communications Minister Ashwini Vaishnaw said that the telecom companies must raise the 5G towers installation per week to at least 10,000 per week from the current 2,500 per week. Around 8,000 towers is ready to help telcos scale the 5G infrastructure, however, the speed of 5G roll-out needs to be maintained. Healthcare sector stocks will be in focus with report that the Comptroller and Auditor General of India (CAG) is in the process of doing a comprehensive audit of the country's health sector, and is adopting an approach different from its earlier exercises, whose remit was relatively narrow. There will be some reaction in real estate industry stocks with a private report that going by the momentum of housing sales in the ongoing festive period and that of the first three quarters of this year, 2022 is likely to breach the previous peak of 2014 with an all-time high sales across the top seven cities. There will be lots of earnings announcements too, to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

17,656.35

17,591.74

17,766.24

BSE Sensex

59,543.96

59,328.22

59,920.46

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

371.63

101.10

100.36

102.16

State Bank of India

198.99

577.00

567.94

586.14

Tata Motors

179.79

404.20

401.44

408.74

ITC

172.42

346.10

343.34

349.19

ICICI Bank

158.38

924.00

916.89

937.19

 

  • Dr Reddy's Laboratories' US-based unit is recalling 2,838 ampules of vitamin K deficiency treatment drug Phytonadione Injectable Emulsion. 
  • Reliance Industries' Board has approved a scheme of arrangement under which the EPC and Infrastructure Undertaking of RPPMSL is proposed to be demerged into the company. 
  • Infosys is extending its Living Labs ecosystem to help Australian start-ups to advance their go to market. 
  • SBI Life Insurance Company has reported 52.76% rise in its net profit at Rs 376.74 crore for Q2FY23 as compared to Rs 246.62 crore for the corresponding quarter previous year.
News Analysis